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North Carolina State Library
Raleigh N. C
Doe.
THE
ESC QUARTERLY
VOLUME 22, NO. 3-4 TOBACCO INDUSTRY
TOBACCO
RESEARCH UBO^TOK*
STflH TOBAGO
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"Our staff has now had an opportunity to study the report
to the Advisory Committee on Smoking and Health. We
believe it is an excellent report and agree with all of the
major findings and conclusions. Consequently, I announced
just two days ago that I had endorsed the main findings and
conclusions which will now constitute general policy for the
Public Health Service."
Dr. Luther L. Terry
U. S. Surgeon General
"It would seem that the sensible solution would be found in
research, to determine what in cigarette smoke causes a
correlation between cigarettes and health problems. I believe
all the experts have agreed that the cause of the health
problem is yet to be determined."
Terry Sanford
Governor of North Carolina
"Those of us who work with tobacco share with the millions
who use tobacco products a concern over questions regarding
smoking and health. Indeed, we have a double interest in the
matter. First, as human beings, we are interested in the
health of our fellow man. Second, we have a natural interest
in the future welfare of our industry—and of the industry's
customers."
George V. Allen
The Tobacco Institute, Inc.
"Mr. Chairman, if there is anything wrong with tobacco,
let us find out what it is. If it is a health hazard, let us find
out why and take corrective measures. When the tobacco
industry is being weighed in the balance, we hope that we
within the industry will not be found wanting, and neither
should the Federal Government."
Malcolm B. Sewell
Leaf Tobacco Exporters Association,
Published by
N.C. EMPLOYMENT SECURITY COMMISSION
ASWELL BUILDING RALEIGH, N. C.
/
KENDALL
CHAIRMAN'S
COMMENTS
Henry E. Kendall
Chairman
N. C. Employment
Security Commission
When we decided to feature the
tobacco industry in this issue of the
ESC Quarterly, it was, frankly, due
to the immense public awareness of
the recent report on "Smoking and
Health" from the U. S. Surgeon General and the
obvious impact such information would have on the
worldwide tobacco industry.
The livelihood of hundreds of thousands of people
in the United States depends upon the production and
marketing of tobacco products, and in an industry al-ready
burdened by over-production of its commodity
the consumer's conviction that smoking is injurous to
his health conceivably could cause a recession from
which the industry would be critically pressed to re-cover.
The Surgeon General's report did cause a reduction
in the use of cigarettes, which now appears to be a
temporary reduction, and a rise, perhaps, in the use
of cigarette substitutes. There is a very pronounced
feeling among tobacco men that the report was non-conclusive,
rather a reiteration of things gone before,
that nothing is actually proven, and they point to their
own attempts for many years to investigate through
research the chemical properties of the leaf and its
habitual nicotine.
So in light of Congressional hearings and universal
publicity and what appeared to be an obvious obstruc-tion
to North Carolina's economy, we asked a repre-sentative
of the tobacco industry to recommend some-one
who would give us an impartial opinion.
"There is no one," he said.
Despite the alarm and general feeling of retaliation
among our tobacco industrialists, there exists a threat
to the tobacco industry even more formidable than the
report of the Advisory Committee on Smoking and
Health. This is a common dilemma to agriculture, one
which has plagued the efficient farmer for many years.
He produces so much and of such quality that produc-tion
exceeds demands, and with raw and processed to-bacco
stockpiling and going into government loan, he
foresees continuing controls and declining allotments.
In 1944 the ESC Quarterly featured cigarette manu-facture.
In 1951 tobacco manufacturing was the Quar-terly
topic. In 1960 the tobacco industry was featured,
so the current magazine is the fourth edition to pre-sent
some aspect of tobacco production and manufac-turing
in North Carolina and is by far the most con-clusive.
Articles containing national, state and local
authority bylines were prepared specifically for the
Quarterly and probably in no past edition has coopera-tion
from contributors been so outstanding.
In 1963 tobacco users spent $8.08 billion for tobacco
products. Tobacco is the fifth largest crop in the
United States and represented $1.3 billion in producer
income. Tobacco manufacturers directly employed
96,000 men and women and in 1963 wages paid to the
insured work force in North Carolina alone amounted
to $156.5 million. Federal, state and local excise taxes
on tobacco products in 1963 yielded $3.3 billion, more
See COMMENTS, page 94
2 ESC QUARTERLY
THE
ESC QUARTERLY
THE TOBACCO INDUSTRY IN NORTH CAROLINA
Volume 22, No. 3,4 Summer, Fa 1
1 1964
Issued at Raleigh, N. C, by the
EMPLOYMENT SECURITY COMMISSION
OF NORTH CAROLINA
Commissioners
Billy Earl Andrews, Durham; Thomas B. O'Conner
Forest City; Horace E. Stacy, Jr., Lumberton; Charles,
L. Hunley, Monroe; Charles T. Kivett, Greensboro;
|
James W. Seabrook, Fayetteville; Henry E. Kendall,
Raleigh.
State Advisory Council
Public representatives: James A. Bridger, Bladenboro,
Chairman: Sherwood Roberson, Robersonville; W. B.
Horton, Yanceyville; Mrs. D. C. Lewellyn, Dobson; Em-ployer
representatives: A. I. Tait, Lincolnton and G.
Maurice Hill, Drexel; Employee representatives: Melvin
Ward, Spencer, AFL, and H. D. Lisk, Charlotte, CIO.
HENRY E. KENDALL Chairman
R. FULLER MARTIN Director
Unemployment Insurance Division
JOSEPH W. BEACH Directoi
State Employment Service Division
H. E. (Ted) DAVIS Editor
Public Information Officer
Sent free upon request to responsible individuals,
agencies, organizations and libraries
Address: E.S.C. Information Service,
P. O. Box 589, Raleigh, N. C.
INDEX ON PAGE 94
COVER LEGEND
Men most concerned and most knowledgeable about to-bacco
spoke this year before the House of Representatives
Subcommittee on Tobacco of the Committee on Agriculture
in Washington. With North Carolina's Harold D. Cooley as
chairman, the Committee met to hear statements concern
ing the U. S. Surgeon General's report on smoking anc
health. Over 50 statements, such as those which are re j
produced in part on the cover, were rendered to the Com
mittee from men vitally concerned with tobacco production,
marketing and research. Parts of other statements an
printed on the opposite page.
OBACCO MEN SPEAK BEFORE HOUSE SUBCOMMITTEE
"To accept the findings of the Surgeon General's report and
say that tobacco is bad and that we should outlaw the
production of tobacco would be as foolish as Baying that
"We find that a large number of deaths are caused by
automobiles and that automobiles are bad and we should
stop production.'
Charles Russell
N. (". Farm Bureau
"The Department's production research is aimed at aiding
farmers to produce tobaccos of a quality which meets
the requirements of domestic and foreign buyers and con-sumers
and that will produce profitable yields. To attain
these objectives, research is carried out on the many com-plex
cultural, diseases, and handling problems that have a
direct influence on the quality and use volume of tobacco."
Dr. Nyle C. Brady
U. S. Department of Agriculture
"As a representative of the basic sciences, I spend my time,
full time, in the laboratory and am interested in a very
basic approach to this problem. And I would like to say
that I hope that this type of support can be extended. I
would strongly recommend that we have an assay system
by which you would tell the possible harmful substances.
And since we do not know the source, it seems foolish to
condemn all of the tobacco until we know what it is in the
tobacco leaf that has to be removed."
Dr. David Young Cooper
University of Pennsylvania Hospital
"If something in tobacco or tobacco smoke is a cause or con-tributing
factor, we need to find out what that something is,
so that it can be removed from tobacco products—and possibly
from other consumer products as well. From such intensive
research could very well come a definitive scientific break-through
as to the cause of cancer in smokers and non-smokers
alike—a breakthrough that might be delayed in-definitely
if tobacco is made the scapegoat and generally
accepted as such."
The late L. Y. Ballentine
Former N. C. Agriculture Commissioner
"If you take our corporate income and franchise taxes—if
you take sales taxes and income taxes paid by the tobacco
workers only, and likewise take the sales taxes on the to-bacco
paid by the consumers in North Carolina alone—we
are talking in terms of about $22.5 million annually going
into the general fund of our State."
Archie Davie
Wachovia Bank and Trust Company
"Still, on the basis of the report to the Surgeon General,
there has been a number of rash proposals to ban smoking
or to stamp a skull and crossbones on every package of
cigarettes. This is utterly absurd on the basis of information
published so far. To be sure many people who smoked have
died of cancer. Some who did not smoke also have died of
cancer."
Horace R. Kornegay
N. C. Representative to Congress
"Now comes the Surgeon General's report which proves for
our satisfaction, and we daresay to the satisfaction of
reasonable men, that smoking is a health hazard. In other
words, from now on the unassailable fact is, the tobacco
industry notwithstanding, that smoking is not safe."
David Cohen
Americans for Democratic Action
"Now, Mr. Chairman and gentlemen, insofar as I can
ascertain there is nothing new—nothing new is claimed in
the contents of this report. It is a very intelligent compila-tion
of statistics which have been prevalent for a long
number of years. And I might add, Mr. Chairman, that we
have not agreed with the interpretation of many of those
statistics."
Fred Royster
Bright Belt Warehouse Association
"We have no intention, or willingness, to disregard the
health factors ; neither are we inclined to permit serious
damage to individual producers, nor to an industry of
economic importance, unless or until reasonably accurate
and complete facts are determined."
Herschel D. Newsom
The National Grange
"The right to smoke or not to smoke is still an individual
right and an individual freedom. Any attempt to legislate
or administrate against this freedom would usher in a
dictatorial type of thinking which I believe would be more
sweeping and more dangerous than any hazards from smok-ing
tobacco."
John C. Williamson
Flue-Cured Tobacco Growers Association
ESC QUARTERLY
Governor Appears Before Federal Trade
Commission To Dissuade Proposal To
Label Cigarettes As Health Hazard
From a Statement Given on January 29, 1964
The proposed rule-making which
now is under consideration directly
affects the economic welfare of the
State of North Carolina.
In larger perspective, it could have
serious implications for the interests
of 21,000,(K)0 Americans who have a
role in the total tobacco industry, and
the concerns of the whole tobacco
region which embraces 21 states. I
would hope the position of all these
people would not be put in jeopardy
on the basis of circumstantial evi-dence
and assumptions.
I appear, therefore, in opposition
to the rules now under consideration.
As the Governor of North Carolina,
I speak primarily on behalf of our
State and its almost five million citi-zens,
all of whom have a direct or an
indirect stake in the tobacco industry.
Much of what I have to say reflects,
at the same time, the interests of all
tobacco regions and people.
First, let me anticipate that I shall
be challenged for suggesting that the
controversy over tobacco and health
is based on circumstantial evidence
and statistical associations. In saying
this, I do not minimize the health
hazard. The fact remains the report
to the Surgeon General on smoking
and health makes it absolutely obvious
that we are dealing with unknowns.
Nobody ever knows the cause of can-cer.
Surgeon General Luther Terry
and every other recognized spokesman
in the health and smoking contro-versy
agree on the one point that
further research is required before
the answer is obtained as to the safe-ty
or hazard of smoking. Not nearly
enough is known.
It can be concluded from the spe-cial
report to the Surgeon General
that the "weight of evidence" indi-cates
an association between exces-sive
cigarette smoking, lung cancer
and certain diseases of the respira-tory
tract. When this is considered in
the worst possible light, the evidence
remains indicative only, and actually
it consists of assumption, and cer-tainly
it doesn't prove that moderate
smoking causes any harm.
In the light of existing knowledge,
I say with all respect to the members
of this Commission, that I hope you
will not assume the burden of proof
for labeling cigarettes as "a health
hazard."
All that is asked by people to whom
tobacco is a livelihood is that our
product not be libeled and our liveli-hood
not be put in jeopardy when
no one yet has the facts, and the
search for scientific proofs is yet
under way.
Let there be no misunderstanding
about the concern for the public
health among the people who grow,
manufacture, and sell tobacco. The
people of North Carolina, and those
who live in other tobacco states, are
more anxious than anyone else to see
cigarettes and other tobacco products
made safe, so that without contro-versy
or insinuation they can con-tinue
to provide enjoyment, content-ment
and relaxation to those who
choose to use them. We sincerely
doubt that smoking in moderation
causes any harm.
We, in North Carolina, subscribe
fully to the campaign for greater and
more purposeful research efforts. All
suggested programs to enlarge the
scientific contributions of the Federal
Government have our full support. At
the same time, we have no inclina-tion
to pass the buck and let the
Federal Government assume the re-sponsibility,
although we put $2 bil-lion
a year into the Federal Treasury.
Our North Carolina tobacco manu-facturers
are contributing the largest
share in two privately sponsored re-search
programs. I refer to the scien-tific
studies sponsored by the Tobacco
Industry Research Committee, into
which $7,250,000 now has been con-tributed,
and to the recently estab-lished
research effort of the American
Medical Association, to which tobacco
manufacturers have committed $10
million over the next five years. If
greater sums can usefully hasten the
arrival at scientific answers to these
health problems, I confidently believe
the tobacco industry can be counted
upon to enlarge its participation.
Meanwhile, there exists a very
great need to synchronize and to bet-ter
organize the many research fa-cilities
which now are at work on
this problem or which can be brought
into play.
To this end in North Carolina we
are seeking to set an example and to
marshal all the research tools and
talents which exist in our State. We
want to bring to bear every resource
we have, in such a way that there
is the least duplication and the great-est
promise of hastening provable
discoveries.
The truth of the matter is that we
have never begun a massive research
attack on the cause and cure of can-cer.
This is long overdue. The problem
is not cigarette smoking alone: it is
the cause and cure of cancer.
I have appointed a three-member
coordinating committee of eminent
scientific administrators. They are Dr.
George Herbert, president of the Re-search
Triangle Institute; Peter
Chenery, director of the State Board
of Science and Technology; and Dr.
William H. Lassiter, chairman of the
North Carolina Cancer Study Com-mission.
It will be the duty of this
committee to draw into cancer re-search
every institution and every
individual from which some scientific
contribution can be anticipated, and
to work directly as an arm of the
Governor's Office.
This emphasis on the economic
scope and importance of tobacco is
not intended in any sense to equate
its commercial aspect with the values
of the public health. But, whenever
consideration is being given to the
problem of tobacco and health, and
the question arises as to what prop-erly
should be done about it, we
cannot escape the awesome respon-sibility
for dealing with a many-sided
problem.
We do not label automobiles dan-gerous
although they are one of the
greatest killers in America. We do
not even restrict advertisements
which glamorize speed and horse-power.
We do not put the skull and
crossbones on the steering wheel al-though
this is the most death dealing
instrument ever invented.
We do not insist that whisky be
labeled with advice that one out of
fifteen who take a first drink will be-come
an alcoholic. We do not force
advertisements to warn that 85 per
cent of all people in prison are there
because of some relationship with
whisky.
Moderation in the use of cigarettes
is likely harmless. No scientist is!
likely to deny this. But reckless con-
See STATEMENT, page 94
ESC QUARTERLY
I
NORTH CAROLINA
DOMINATES WORLDWIDE
TOBACCO INDUSTRY
By Edwin Stanhope Dunn
and J. Anthony Houser
Bureau of Employment Security Research
Not only is North Carolina the
number one tobacco state, but the
extent of its dominance in the indus-try
is revealed by the fact that it
continues to manufacture more to-bacco
products than all of the other
49 states combined, based on Federal
tobacco tax receipts. For the fiscal
year ended June 30, 1963, North
Carolina tobacco employers paid the
United States Government $1,268,316,
000, or 61 percent, of the $2,079,237,-
000 1 total tobacco tax paid by all
tobacco firms in the United States.
The accompanying tables depict
Federal tax sales on tobacco and the
value added by manufacture for 1962
in both the United States and North
Carolina.' As shown in other charts
and tables in this article, North Caro-lina
tobacco contribution is indeed
significant.
Gross Wages
In 1963, gross wages paid by the
insured segment of the North Caro-lina
tobacco industry totalled $156.5
million. With more than 34,000 work-ers
employed in this group, an aver-age
weekly earnings of $88.38 was
realized per worker, or $12.69 above
the average worker earnings in all of
the State's manufacturing industries
in 1963. The employment size of
North Carolina's tobacco industry
places it near the top among the
other industries in the State also, as
only four other manufacturing groups
had more employment in 1963 ; name-
As tobacco products sold in foreign coun-tries
are not subject to the Federal tax,
only the manufactured tobacco products which
are sold in the United States are included.
Latest available data.
ly, textiles, furniture, apparel and
food products.
During 1963 the average payroll
contribution rate for cigarette manu-facturers
liable under the Employ-ment
Security Law in North Carolina
was only 1.21 percent as compared
with 3.15 percent for the balance of
the industry which is made up mostly
of tobacco processors.
Four cigarette manufacturing com-panies
of worldwide importance are
found within the borders of North
Carolina. They are R. J. Reynolds
Tobacco Company in Winston-Salem;
American Tobacco Company in Dur-ham
and Reidsville; Liggett and
Myers Tobacco Company in Durham;
and P. Lorillard Company, Inc. in
Greensboro. These four firms manu-facture
more than three out of every
five cigarettes made or imported in
this country. Two establishments in
Winston-Salem, Brown & Williamson
and Taylors Brothers, Inc., manufac-ture
chewing tobacco and snuff.
Since cigarettes comprise by far
the largest volume of tobacco prod-ucts,
the types of cigarettes manu-factured
may be of interest. Filter
tips comprised 299 billion or 58 per-cent
of the national consumption of
domestic cigarettes in 1963 ; king
size amounted to 99 billion or 19 per-cent;
and regular sized cigarettes
totalled 116 billion or 23 percent.
Leads in Tobacco Processing
North Carolina also is the leading
state in tobacco processing with as
many as 25 to 30 thousand workers
engaged in tobacco stemming and
redrying operations during the heights
ESC QUARTERLY
DUNN and HOUSER
of the season in September. In addi-tion
to the cigarette manufacturers,
there are over 50 independent tobacco
processing plants scattered over the
State. Also, during the season, the
cigarette manufacturers set up tem-porary
buying and prizing operations
in the principal tobacco markets over
the State, which supplement and com-plement
the regular processing work
force. The seasonality of employment
in the industry may be seen in Chart
I, which shows insured employment
for the period 1950-1963. September,
1960, was the first time that tobacco
employment in North Carolina passed
the 50,000 mark. Although the next
two years (1961 and 1962) saw to-bacco
employment rise above the 50,-
000 figure in September, 1963 's peak
amounted to only about 48,000 work-ers.
The ten percent allotment cut in
1963 contributed to this decline as did
continued automation in the produc-tion
facilities. The dominance of the
North Carolina tobacco crop in the
agricultural income picture of the
State is evidenced in Table III.
As the leader in tobacco processing,
one would expect North Carolina to
be the top ranking state in the grow-ing
of flue-cured tobacco. Based on
flue-cured tobacco sales in North
Carolina in 1963, the State likewise
accounts for over three-fifths—as was
the case with cigarettes—of all flue-cured
tobacco. (See Table III.) For the
1963 crop, although the average price
per hundred pounds in North Caro-lina
brought $2.18 less than the South
Carolina average, the State's average
of $58.05 was 35 cents more than the
over-all flue-cured average.
Quantity or Quality
In the past few years much has
been said about the deteriorating
quality of tobacco under the stabiliza-tion
program, and the increasing com-petition
experienced from foreign
countries, especially Rhodesia, Cana-da
and India. The chief criticism of
our tobacco has been that the farm-ers'
emphasis has been on quantity
and not quality; and, as a result, the
tobacco manufacturers have sought
good quality smoking tobacco where-ever
it could be found.
By reason of wide publicity on
quality, plus government action and
excellent growing weather during the
1964 crop, it appears from early
flue-cured sales in the 1964-65 season,
that an excellent quality smoking
crop in 1964 is in the making. Per-haps
these are just the forces needed
to give impetus to the movement back
to quality in order to blunt, if not re-capture,
part of the ground lost to
foreign competition and to correct
overproduction.
A comparison of over-all tobacco
employment in the United States and
North Carolina since 1950 is shown
in Chart II. As can be seen, this State
has been increasing its lead and domi-nance
over the years. Whereas, North
Carolina accounted for "only" 24.5
percent of all national insured tobacco
TABLE I
FEDERAL TAX STAMP SALES FOR TOBACCO
IN UNITED STATES AND NORTH CAROLINA
YEAR OF 1962
Industry Value of FederEd Tax Stamps Sales Percent
Group United States North Carolina of U. S.
Tobacco—Total $2,079,237,000 $1,268,316,000 61.0
Cigarettes 2,010,524,000 1,263,144,000 62.8
Cigars 50,232,000 b —
Tobacco (Chewing
& Smoking) & Snuff 16,381,000 4,620,000 28.2
Other" 2,100,000 552,000 26.3
' Includes taxes on cigarette paper and tubes, court fines, penalties and taxes on leaf tobacco sold
or removed in violation of Section 5731, Internal Revenue Code.
b Negligible.
Source: Annual Report of Commission of Internal Revenue for Period Ending June 30, 1963,
TABLE II
VALUE ADDED BY MANUFACTURE IN TOBACCO
FOR UNITED STATES AND NORTH CAROLINA
Industry Group
Cigarettes
Tobacco Stemming
& Redrying
United States
$1,248,402,000
North Carolina Percent of U. S
118,600,000
Source: Annual Survey of Manufactures—1962.
$762,849,000
59,501,000
61.1
50.2
TABLE III
GROSS SALES OF FLUE-CURED TOBACCO
BY STATES—1963
Average Price
State Pounds Per cent of Total
63.7
Per Hundred Pounds
North Carolina 932,797,616 $58.05
Georgia 173,195,347 11.8 56.98
Virginia 168,393,666 11.5 54.20
South Carolina 163,606,690 11.2 60.23
Florida 25,353,880 1.7 56.74
Total 1,463,347,199 100.0 57.70
Source: North Carolina Tobacco Report, 1963-1964.
DISTRIBUTION OF INSURED EMPLOYMENT AND WAGE PAYMENTS
IN THE NORTH CAROLINA TOBACCO INDUSTRY
BY MAJOR PRODUCTS—1963
No. of
Tobacco Reporting Avg. Monthly
Products Units Employment Total Wages
Averagi
Contribuifl'
Contributions Rate ('
134
6
'lotal
Cigarette
Manufacturing
Tobacco (chewing
& smoking) & snuff
Tobacco Stemming
& Redrying 128
34,054 $156,494,106 $1,743,652 1.74
23,798 $121,512,072 $ 874,367 1.21
10,256 $ 34,982,034 $ 869,285 3.15
ESC QUARTERLY
employment in 1950, its commanding-lead
had grown to about 36 percent
by 1962. And this was accomplished
by significantly divergent trends: na-tional
employment declined during
the period, while North Carolina's
tobacco employment rose despite the
jver present downward influence of
automation.
Report Wallops Sales
A relatively new problem confront-ing
both North Carolina and the
United States concerns the Surgeon
Seneral's report on smoking and
lealth, released in January, 1964.
Immediately following this report,
wholesale and retail outlets for cigar-
?ttes in the country experienced a
iecline of 10 to 15 percent in sales,
^.fter the sharp decline in sales, a
-ecovery set in during subsequent
nonths.
From a nationwide viewpoint, aside
"rom North Carolina, the impact of
;obacco on the over-all economy can-lot
be exaggerated. In the United
states, tobacco is an $8 billion indus-
,ry. In 1962, 750,000 American farm
'amilies in 21 states received over
51.3 billion from tobacco crop sales.
Tobacco is the fifth largest cash
•rop in the nation, and in 1962, ranked
hird in value of all agricultural ex-
)orts. Cash farm income from to-lacco
exceeded the total for all truck
•rops grown in the United States.
Although the 1962 cash farm receipts
vas grown on only four-tenths of one
>ereent of the nation's cropland.
Indicative of the relatively high-ost
and high-labor requirements of
he tobacco crop is the $155 million
n wages paid by farmers to hired
abor in the production and curing of
obacco in 1962, and more than half
t billion dollars for other expenses in
iroduction and marketing.
Other industries which are closely
ied in with and affected significantly
>y the national tobacco crop are as
ollows: fertilizer and lime, $45 mil-ion
annually; pesticides, $20 million;
uel oil for tobacco curing, $70 mil-i^_
i
i' '-•>
Z^
CHART NO. 1: INSURED EMPLOYMENT
IN N. C. AND U. S. FOR SELECTIVE
YEARS 1950-62: North Carolina has
increased its lead in insured employ-ment
compared to overall tobacco em-ployment
across the nation. Tobacco
jobs increased in our State despite the
ever present influence of automation.
lion; textiles, $8 million for tobacco
plant bed cloth and $2.5 million for
tobacco twine, for a total of $10.5
million; and miscellaneous, $55 mil-lion—
including $40 million in auction
warehouse receipts. In addition to the
side industries serving the farmers,
a number of supplying industries;
e.g., cigarette paper manufacturers
are dependent upon the tobacco prod-ucts
manufacturers for their revenue.
Banks and other financial institu-tions,
as well as forest industries
that produce tobacco sticks and bas-kets,
are greatly affected by tobacco's
behavior, not to mention the economic-impact
on retail establishments.
Manufacturing 55 Percent Of Payroll
In 1962 the nation's tobacco manu-facturers
gave employment to about
97,000 workers, with wages totalling
$400 million. Even though cigarette
manufacturing employed only 44 per-cent
of all tobacco manufacturing, it
accounted for more than 55 percent
of the industry's payroll.
CHART NO. II: INSURED EMPLOYMENT IN TOBACCO MANUFACTURING IN NORTH
CAROLINA, 1950-62: The seasonality of tobacco employment can be graphically demon-strated.
In 1960 tobacco employment for the first time in North Carolina passed 50,000
workers. In 1963 the peak of employment amounted to only about 48,000 workers.
The transportation segment of the
economy also merits consideration.
Hauling tobacco within the borders of
the continental United States is a $79
million a year business. Cigarette
paper is a $25 million a year industry
in which Ecusta Paper Corporation,
near Brevard, North Carolina, pro-duces
about 95 percent of cigarette
papers made in the United States.
The manufacture of cellophane, of
which the tobacco industry used 40
million pounds in 1961, is another
important item made at Ecusta. In-cidentally,
bakery and meat products
are the only industry groups using
more cellophane than tobacco. Ap-proximately
71 million pounds of
aluminum foil are used annually for
wrapping cigarettes. Also, in four
states where no tobacco is grown,
farmers derive an annual income of
nearly $3 million from the production
of flax fiber used in manufacturing
cigarette paper.
Excise taxes collected from tobacco
products by federal, state and local
governments amounted to $3.2 billion
for fiscal year 1961-62. Federal ex-cise
taxes on cigarettes alone ($2
billion) were more than 15 percent
of the total federal excise taxes col-lected
in that year. In addition to the
federal excise tax levy, every state
except three—North Carolina, Colo-rado
and Oregon—levy additional
state taxes on tobacco." For that mat-ter,
six states have the same levy on
cigarettes as the federal government;
namely, eight cents per package, or
a combined tax of 16 cents per pack.
With a package of cigarettes selling
for 27 to 30 cents, the impact of such
taxes is obvious.
Federal income taxes paid by to-bacco
manufacturers totaled $330
million ; and they paid approximately
$7.5 million in ad valorem taxes in
North Carolina alone in 1961.
In summary, an estimated 17 mil-lion
people in the United States de-pend
on tobacco for all or part of
their livelihood, so it certainly can be
said that the "Golden Weed is a
broad golden stream." Small won-der,
therefore, that so many people,
and especially North Carolinians,
should shudder each time there is a
lung cancer pronouncement associated
with tobacco; and can only hope that
advancing research may overcome
any tobacco deficiencies. The federal
government might well take an even
more active role in this connection as
it too is involved to the tune of many
millions of tax dollars.
* Combined Federal and States taxes per car-ton
of cigarettes in 1963: $0.80 per carton
—
3 states; $1.00—1 state and D. C; $1.05—1:
$1.10—3: $1.15—1; $1.20—8: $1.30—9; $1.40—
11; $1.50—7; and $1.60 per carton—6 states.
Source: Tobacco Tax Council, North Carolina
Tobacco Report—1962-63, April, 1963.
ESC QUARTERLY
GEORGE V. ALLEN is a native of
Durham and a 1924 graduate of Trin-ity
College (now Duke University).
As an undergraduate he decided to
enter the foreign service and financed
his post-graduate work in inter-national
law at Harvard by working
as a school teacher and newspaper
reporter. Allen took his masters degree
in 1929 and took the foreign service
examination the following year. In
subsequent years he had the distinc-tion
of representing the United States
as ambassador to four countries,
Iran, Yugoslavia, India and Greece,
and served as Assistant Secretary of
State on two occasions. At the age of
42 he was our youngest ambassador
abroad when President Truman ap-pointed
him as ambassador to Iran.
Allen has participated in a number of
international conferences, including
the Foreign Ministers' Conference in
Moscow in 1943, the Roosevelt-
Churchill Conference in Cairo in 1943,
the United Nations Conference in San
Francisco and the Potsdam Confer-ence
in 1943. Awarded honorary de-grees
from six American colleges,
Allen achieved the highest rank ob-tainable
by an American diplomat
and is one of 14 Americans who have
been accorded the permanent classifi-cation
of Career Ambassador. His
latest assignment was Director of the
U. S. Information Agency, and he
returned to the tobacco industry in
1960. A trustee of Duke University,
Allen owns a tobacco farm near Dur-ham,
N. C. He is married to the for-mer
Katharine Martin of Washington,
D. C.
It's Unlikely, But Formers Need Voluntary
Progrom . . . Not Government Intervention
By George V. Allen
President, The Tobacco Institute, Inc.
V.exations of the times notwith-standing,
tobacco is here to stay.
Any commodity which has survived
more than 350 years of sustained as-sault
has amply proved its durability.
Tobacco's survival is assured by
more than 70 million Americans—and
many more millions in lands around
the world—who find its use pleasur-able
and relaxing. It also is assured
by the superior quality of U.S. to-bacco,
which most of the world shows
a sustained willingness to buy even
when it is sold at premium prices.
The industry is now in a difficult
period.
We recognize the seriousness of
purpose of those who are concerned
about tobacco and health, but we are
confident that science will provide
the answers to questions that now
exist.
The most immediate development
in the current situation came in
August when the Federal Trade Com-mission
deferred for six months the
effective date of its arbitrary rule to
require health warnings on cigarette
packages. The new deadline is now
July 1, 1965, which is also the dead-line
for a required health warning in
all cigarette advertising.
The delay will give Congress time
to consider various legislative pro-posals.
It is the conviction of many
business groups, legislators and
newspapers, as well as the tobacco
industry, that the FTC overstepped
its authority in seeking to legislate
such rules regulating labeling and
the content of advertising. Such
powers belong to the Congress alone,
rather than to an independent agency
set up to administer laws, not to
make them.
These questions, however, now can
be clarified by the next Congress and
we are confident its members will
consider all the pertinent factors be-fore
taking action.
Meanwhile, the House Committee
on Foreign and Inter-state Commerce,
considering the matter, has heard
testimony from a number of promi-nent
medical scientists who expressed
doubts concerning the health charges
against tobacco.
The Arithmetic
Happenings such as these are
clearly of the greatest import to the
long-range economy of North Caro-lina
and especially to the functioning
of its Employment Security Commis-sion.
As America's principal grower
of tobacco and manufacturer of its
products, North Carolina will be
heavily affected by the course of to-bacco's
fortunes. Whatever happens
to tobacco will happen in enlarged
form on North Carolina farms, in its
warehouses, its factories, its trans-portation
industry and in its retail
economy.
In several states tobacco provides
a sizeable share of all farm cash in-come—
and for North Carolina this
share is around 50 percent. The
rapid fanning-out of that money to
all other sectors of the State economy
is obvious. There are abundant statis-tics
on the billions in spending which
tobacco generates—for farm and fac-tory
wages, transport, paper, foils,
fertilizers and so on. In addition,
direct tobacco taxes bring about $3.3
billion into federal, state and local
treasuries, and when the consumer
pays out his tobacco dollar, who is to
compute how many times—and how
much—that dollar is thereafter taxed
in the endless process of changing
hands?
Jobs and taxes are critical to peo-
8 ESC QUARTERLY
pie and to governmental budgets that
keep trending upward. But we must
also give serious consideration to the
health problems which cannot be, and
are not, easily ignored.
Research—and More
In that light, the most useful and
hopeful action all segments of the
tobacco industry can take, with re-spect
to both their public responsi-bility
and self-interest, is to intensify
organized scientific research. Part of
this is being done through the Coun-cil
for Tobacco Research—U.S.A., and
through the five-year, $10 million
grant which the six major cigarette
manufacturing companies have made
to the American Medical Association
Education and Research Foundation.
Also encouraging was the Senate-
House approval in August of a $675,-
000 additional allocation to the Ox-ford
(N.C.) Experiment Station for
basic research in tobacco. This is
more than twice the research money
formerly available there, and much
of it is intended to be devoted to stu-dies
that should bring better under-standing
of the health questions.
The industry's most immediate
need is therefore clear: Expanded
scientific research in all aspects,
chiefly in the areas of agriculture
and health. Tobacco's future depends
upon it — objective, unrestricted,
imaginative research, carried on by
the industry and by the scientific
community in general.
Tobacco—The Stable Staple
For 352 years tobacco has been
among the steadiest sectors of the
American economy. Investment in it
through share owning has come to
be regarded, for practical purposes,
as depression proof, or nearly so.
Styles in tobacco's use have
changed rather slowly with time
—
from snuff to plug to smoking cigar-ettes
and cigars—each shift in custom
bringing greater consumption, al-though
none so phenomenal as the
surge of the cigarette since 1914.
The last generation's changes have
been largely technological and have
mainly affected cigarettes, which
have gone to longer length, to men-tholation
and then to nitration.
Manufacturing technology has been
able to take these in stride, and there
is presently no visible consumer de-mand
pointing to the likelihood of
radical changes in growing or manu-facturing
processes. Therefore, all
bther market factors remaining equal,
there should be no question of con-tinued
industry stability.
The Export Outlook
The long-range promise for tobacco
(exports is even more hopeful. Exports
will increase as trade barriers are
Iropped, because American tobacco
ind American tobacco products are
still the best in the world. This is
shown by the fact that even though
our prices for leaf and the price at
which American cigarettes are sold
abroad are far higher than any com-petition,
leaf exports have held their
own and product exports have in-creased.
If given an equal chance,
American leaf and products would
very steadily increase. If there were
a common market among the U.S.,
Canada, and Europe, for example, our
industry would find a greatly in-creased
demand.
Price Support
While the Tobacco Institute does
not take a policy position on govern-mental
support of tobacco leaf prices,
I have never heard a manufacturer
complain about the program. On the
contrary, I have heard many speak
in its favor. Manufacturers are aware
that the prosperity of the industry
is indivisible and that they can-not
prosper if farming languishes.
Neither flue-cured nor burley can
flourish if the other is depressed. The
destiny of the entire industry, from
grower to retail dealer, is a common
destiny.
The tobacco farmer works hard for
his crop and should receive a good
return for his labor. This may not be
feasible without some workable form
of production control. Two major
problems must be avoided, it seems
to me. If we are to continue to export,
the price of U.S. leaf and its products
must not get too far out of line with
the world market, and the search for
a heavier yield per acre must not be
allowed to reduce the high quality of
our leaf.
As the owner of a small tobacco
acreage in North Carolina, I per-sonally
have been inclined to favor
some combination of acreage and
poundage as a basis for allotments.
I believe the trend is in that direction.
I believe also that a sudden removal
of all controls, favored by some
groups, would bring chaos. Maryland
farmers voted controls out a few
years ago, but after a brief experi-ence,
were eager to vote them in
again.
I am not certain that subsidies to
tobacco farmers are necessarily a
long-term likelihood. We may see
them end if production and consump-tion
can be brought into somewhat
better balance. The tobacco industry,
from end to end, would rather stand
on its own without reliance upon tax
money. For some time after the to-bacco
program began that appeared
to be possible. We were proud that
the program was costing the taxpay-ers
nothing. But a hope of keeping it
that way was dashed by a natural re-sult
of controls based on acreage
alone, for new types of tobacco were
planted to increase quantity at the
expense of quality. Stocks in stabili-zation
began to increase faster than
sales.
If poundage control can correct
this unhappy situation, we may again
be able to take renewed pride in a
program which does not cost the tax-payers
money.
I would be happy if farmers could
agree on a voluntary program that
would stabilize production, with no
governmental intervention. But that
happy day seems rather unlikely.
In the meantime, we need not
shrink from price supports. They are
solidly grounded in a democratic sys-tem.
Government is but a mechanism
designed by people to serve their
common welfare. A majority of those
people could abolish not only controls,
but the government itself. Government
becomes the enemy only when those
who lead it overstep Constitutional
bounds. But it is first a creation of
and for people, and where it is useful
and convenient, as in the support
program, we in tobacco cannot justi-fiably
oppose our own interest by re-fusing
to use its mechanism.
The most practical and pragmatic
view, it seems to me, is that the
tobacco program, however imperfect,
is preferable to chaos, and that with
some changes it can be made a much
more useful tool, especially for farm
ers.
And What About North Carolina?
None of the problems I have sug
gested appears, by itself, to pose a
major threat. North Carolina's leaf-producing
primacy seems to be in no
danger. The state still holds the prin-cipal
qualifications to maintain its
lead—climate, soil, factories, agricul-tural
and manufacturing know-how.
It also has that intangible but vital
asset—the tradition.
But if science or technology or
simply changing taste should at some
future time indicate a rather different
type of tobacco—blander perhaps, al-though
that is pure speculation
—
North Carolina has the soil, climate,
research and know-how to produce it.
North Carolina can best assure its
leadership by emphasizing research —in its agricultural experiment sta-tions,
its great universities, its hospi-tals,
the laboratories in its factories
and in the Research Triangle.
If the state is complacent, its top
position will be taken by some other
state.
After all, tobacco can be grown
almost anywhere in the U.S. During
the past 10 years, Canada has become
self-sufficient in growing the leaf, and
Canada may become a competitor of
ours in the export market. Canada
and Rhodesia have great experimen-tal
activities underway. The challenge
is urgent.
ESC QUARTERLY
; ;.- v<.
^
ift' "^
IS III IIS
IN AGRICULTURAL
LOANS MADE TO
TAR HEEL FARMERS
By Archie K. Davis
Chairman of the Board
Wachovia Bank and Trust Company
Progress takes places when people
act individually and cooperatively to
solve problems and realize opportuni-ties.
The people of North Carolina
time and again have shown their de-termination
and ability to rise to the
challenges confronting them. Their
success can be measured in many
ways, including an increase in per-capita
personal income from $1,200 in
1954 to $1,814 last year—a 51 percent
gain compared with a 38 percent na-tional
increase.
In tobacco, as in other vital seg-ments
of the Tarheel economy, the
truly significant story is the story of
people and of what they have accom-plished
and seek to accomplish to
overcome obstacles and create prog-ress.
The tobacco growers, the warehouse-men,
the leaf dealers, the manufac-turers,
the farm and industry sup-pliers,
the scientists who do tobacco
research, the bankers who provide
financial assistance and other serv-ices:
these and many other people
may take rightful pride in their con-tributions
to the development of the
tobacco industry in North Carolina.
However, contributions now being
made and still to be made will deter-mine
the future place of tobacco in the
strong, balanced and growing economy
needed to enhance further the living
standards of all North Carolinians.
To comprehend the importance of
these contributions, it is necessary
first to understand the present sig-nificance
of tobacco to our economy.
And it is also necessary for tobacco's
many friends to continue their con-certed
efforts to promote broader and
deeper public understanding of this
significance. For this reason, informa-tional
programs such as this special
tobacco edition of the Employment
Security Commission Quarterly are
particularly worthwhile.
Today, more than 165,000 farm
families (more than 700,000 individ-uals,
using the 1960 census figure of
almost 4.4 persons in each farm
family) in North Carolina receive
part or all of their income from to-bacco.
Each year they grow more
than 900 million pounds of flue-cured
leaf and convert their harvest into
more than $500 million.
These dollars earned in the fields
and curing barns flow into the total
economy in countless ways. With this
income the farm families of North
Carolina shelter and clothe and feed
themselves, educate their children,
purchase the necessities and luxuries
of modern living, save for the pro-verbial
rainy day, pay taxes to local,
state and federal governments to
support education and other public
services. There is no need to belabor
the impact on the North Carolina
economy of more than $500 million
worth of tobacco marketings each
year; it is an impact felt directly or
indirectly from one end of the state
to the other.
The flue-cured and burley tobacco
growers of North Carolina sell their
crops in 47 separate community mar-kets
across the state. In these commu-nities
there are 225 warehouses, rep-resenting
a very substantial capital
investment and providing seasonal em-ployment
for some 10,000 persons.
Only a few relevant facts and
figures are needed to express the sig-nificance
to the North Carolina econ-omy
of the manufacturing process.
Tobacco manufacturing provides jobs
for more than 40,000 men and women
and generates annual payrolls in ex-cess
of $160 million. The original cost
of tobacco manufacturing plants and
equipment in the state is estimated at
more than $360 million. And annual
sales of North Carolina tobacco manu-facturers
total well over $3 billion
—
a figure that approximates one-third
of the total manufactured value of all
products produced annually in the
State, and a figure that would be sub-stantially
higher if measured at retail
price levels.
The total voume of federal, state
and local tobacco taxes ($3.3 billion
last year) often has been noted in
studies of tobacco and the national
economy. Less widely recognized bull
of vital importance to North Carolina
is the State and local governmenl
share of this total. In 1962, for ex-ample,
North Carolina collected $14.^
million in corporate income and fran-chise
taxes from the tobacco industry
The industry paid about $7.5 milliorj
in county and municipal propertj
taxes. Tobacco workers paid $2.9 mil |
lion in individual income taxes and
about $2.5 million in sales taxes-while
consumers were paying $2.
J
million in sales taxes on tobacco prod
j
ucts.
Loans Serve Growers
In providing loans to meet a widJj
range of capital and operating needs
j
the bankers of North Carolina servl
the tobacco growers, the warehouses]
man, the leaf dealer, the manufacture:
and others associated with tobacci
production, marketing and process^
ing.
Agricultural loans to North Caroii
lina farmers from commercial bankI
ers totaled more than $150 million oil
June 30 last year, for example, ami
there has been a steady upward trenJ
in recent years in these loans to tol
bacco growers and producers of othejj
crops and livestock.
DAVIS
10 ESC QUARTERLY
As with financial assistance to
warehousemen, leaf dealers and man-ufacturers,
the emphasis in bank
credit to growers is on flexibility
:
tailoring: the loan to a realistic re-payment
schedule in line with the
borrower's specific needs.
The relatively high costs of tobacco
growing place special demands on
both the grower and his banker, and
there is encouraging evidence that
the demands are being met. One sur-vey
conducted in the Fifth Federal
Reserve District (North and South
Carolina, Virginia, Maryland, West
Virginia) showed that almost two-thirds
of bank loans extended to to-bacco
growers were for current oper-ating
expenses. This compared with a
50 percent figure for all farm loans
in the area.
The relationship between ware-houseman
and banker in North Caro-lina,
like that between grower and
banker, is close. Large amounts of
working capital are essential to the
smooth functioning of the marketing
process. Because of the extension of
seasonal lines of credit to the ware-houseman,
the grower receives pay-ment
for his tobacco within minutes
after the auctioneer moves on down
the lines of piled leaf.
Bank credit performs similar func-tions
in the handling and processing
of tobacco after it leaves the ware-house
floor. Seasonal loans to leaf
dealers aid them in purchasing to-bacco
for resale, and a wide range
of financial and related services fa-cilitates
the movement of North
Carolina tobacco into the channels of
international trade. (Flue-cured ex-ports
in 1963 amounted to 474 million
pounds, farm sales weight, compared
with 435 million pounds in 1962 and
461 million pounds in 1961.)
All Segments Share Responsibility
The bankers of North Carolina also
work closely with tobacco products
manufacturers, providing significant
financial assistance and other services
to these major and continuing con-tributors
to the Tarheel economy.
The impact of tobacco upon all
areas of the state's economy is of
great magnitude. As a result, all seg-ments
of the economy—and not just
tobacco interests — bear a large
measure of responsibility to support
the industry as it seeks to solve its
problems and meets its challenges.
Among these problems is the fa-miliar
one of quality and quantity.
The tobacco price support program,
although one of the most efficiently
operated and least expensive com-modity
programs, has encouraged
overproduction of flue-cured leaf. A
decline in quality has accompanied
rising production in many areas of
the State. The effects include a falling
U. S. share of the world market for
flue-cured tobacco and mounting sur-plus
stocks.
Then, too, there is the health con-troversy
which has been given so
much publicity in recent months de-spite
the lack of positive evidence
showing more than statistical re-lationships
between smoking and
health.
Because of these problems and
other challenges, it is obvious that
the ability, determination and dedica-tion
of thousands of individuals with-in
the industry and in other segments
of the economy will be required to
assure continuing profitable progress
in tobacco.
There are encouraging indications
of such progress on a number of
fronts.
Quality
The quality of North Carolina flue-cured
leaf always has been a source
of great pride (and a boon to the
pocketbook) for the Tarheel grower.
Yet, as previously mentioned, quality
has declined. Determined efforts by
ARCHIE K. DAVIS, trustee to three colleges, is a recognized leader in
national banking and commercial organizations: Director of the Chamber
of Commerce of the U. S.; Past President of the American Bankers
Association's State Bank Division; former Director of the Charlotte
branch of the Federal Reserve Bank of Richmond; a former Director and
member of the Executive Committee of Robert Morris Associates ; Presi-dent
of the Research Triangle Foundation of N. C; and a former
member of the State Senate representing Forsyth County. A native of
Winston-Salem and a graduate of the University of North Carolina,
Davis is also a Director of the Western Electric Company, P. H. Hanes
Knitting Company, Chatham Manufacturing Company, Sellers Manu-facturing
Company and several other organizations. Davis has been
associated with Wachovia Bank and Trust Company since 1932. He was
elected Senior Vice President and placed in charge of the bank's Winston-
Salem office in 191^6, and was elected Chairman of the Board in 1956.
"The relatively high costs of tobacco growing," reports Davis, "place
special demands on both the grower and his banker, and there is en-couraging
evidence that the demands are being met." Bank credit to
growers is flexible and the loans are "tailored to a realistic repayment
schedule in line with the borrower's specific needs."
tobacco growers and other interested
in leaf quality are beginning to pay
real dividends, however, and im-proved
quality is clearly evident in
the 1964 crop. Much more remains
to be accomplished.
Research
North Carolina tobacco interests
long have recognized that research
means progress in tobacco produc-tion,
processing and manufacturing.
Publicly and privately supported re-search
in tobacco offers great promise
for answers to questions that both
concern and challenge the industry,
and the increasing financial support
being given to research is highly en-couraging.
Further increases will be
necessary.
Awareness and Action
One of the most heartening tobacco
developments in recent years is the
growing awareness that further prog-ress
in this significant areas of our
economy depends on action by indi-viduals
as well as by private and
public organizations. Now more than
ever before, there exists a willingness
and a determination among all in-terests
to come to grips with clearly
evident problems: the unity of pur-pose
arising from this willingness
and determination augurs well for
the future.
Tobacco is surrounded by compli-cated
and complex forces that are
extremely difficult to evaluate, Dr.
Kenneth R. Keller, in charge of to-bacco
research at N. C. State of the
University of North Carolina at Ra-leigh,
said earlier this year at a
three-day tobacco conference.
"We need to be constantly alert to
new developments which offer oppor-tunities,"
Dr. Keller declared. "We
need to know not only what is new in
tobacco but the implications as well.
We must be concerned with the fun-damental
changes and how to guide
them to serve the best interests of all.
These changes, if wisely directed, will
bring a higher level of living to in-dividuals
in all segments of the in-dustry.
. . .
"Ours is not only an individual
responsibility but a collective respon-sibility
in which each assumes his
rightful role."
The progressive bankers of North
Carolina recognize their individual
and collective responsibility to con-tinue
and increase their contributions
to the tobacco industry of the state.
I am confident that, through the ex-tension
of financial assistance and
through other types of direct and in-direct
support, the bankers of this
state will continue to work for to-bacco
and for the people who grow,
process and transform it into prod-ucts
that bear the proud label, "Made
in North Carolina."
ESC QUARTERLY 11
TOBACCO
QUALITY
By W. P. Hedrick
Tobacco Specialist, Division of Markets
N. C. Department of Agriculture
The word quality, the measuring'
stick for the cash value of flue-cured
tobacco, has been a nebulous char-acteristic
for the past few years.
At one time every grower in the
area could judge his crop from a
quality standpoint and almost tell you
what company would buy each grade
from a given crop.
There was a sharp distinction be-tween
the grades bought by domestic
buyers and those grades bought by
foreign buyers. The buying patterns
of the companies first began to change
during the mid 1950's when the first
health charges were brought against
cigarettes. The cigarette smoker
began to switch his smoking habit
from regular sized cigarettes to filter
tips.
Traditionally, domestic buyers had
bought tobacco with lighter bodied
texture than the foreign buyer, but
with the advent of filter tips on the
American market, the domestic com-panies
dipped over into the foreign
types in order to get flavor and aroma
to the smoker through the filter. At
this point, the question of what is
quality began to plague the tobacco
grower; should he strive to produce
tobacco of heavy bodied texture or
continue to plant old line varieties
that had proven desirable to the buy-ers
through the years? Fate made
the decision for him with the dis-covery
of plant diseases on the farms.
Granville wilt, black shank and many
others made it clear that to continue
to produce tobacco, disease resistant
varieties would have to be used.
Disease Resistant
Tobacco seed breeders developed
several disease resistant varieties that
have kept the North Carolina tobacco
grower in business. These disease re-sistant
varieties which tolerate a high
level of fertilization have enabled
tobacco growers to more than double
the yield per acre in the past ten
years.
However, consumer preference in
types and kinds of cigarettes and
technological advances in manufac-turing
of tobacco products have
changed the long understood terms
of quality in the raw product to a
new definition known to the buyer as
usability.
The tobacco grower at the present
time is going through the stage of
trying to learn and understand what
the domestic and foreign buyer means
by usability. At a recent meeting of
tobacco growers, one domestic buyer
tried to explain the changes in the
usage along the following lines.
Over a period of years the prefer-ence
of American cigarette smokers
has changed perceptibly in the direc-tion
of a milder product. In the case
of cigarettes, this trend has been
abetted by the widely publicized
health charges over the past ten years
and promulgation of the idea that the
health hazard is related to the amount
of nicotine and tar in the smoke. The
average amount of nicotine in the
smoke of five leading brands of cig-arettes
has been reduced by half over
the past ten years.
Lower Nicotine
Manufacturers have accomplished
this reduction in nicotine content of
the smoke by selection of usable
grades of tobacco, blending, and the
use of filters.
The American public has been edu-cated
to accept a lower amount of
nicotine in the cigarette but they still
want good taste, full aroma and full
smoke flavor.
In buying tobacco on the warehouse
floor, all buyers are purchasing grades
with low nicotine content, yet with
full aroma and smoke flavor.
A third and important definition of
quality is placed on flue-cured tobacco
by the United States Department of
Agriculture, Tobacco Division, where-by
tobacco placed on the warehouse
floor is inspected before sale and a
U. S. Government grade placed upon
each pile. The U. S. Tobacco Inspec-tor
is a highly trained skilled judge
of tobacco who uses a system of
grades based mainly on the position
that tobacco grows on the stalk. These
grades are used to identify stalk posi-tion,
quality, color, and to substanti-ate
the support price used by the
Commodity Credit Corporation price
support program.
The grading system used by the
Government to identify quality has
been in effect many years and most
growers are fairly familiar with its
use. Therefore, the grower has to
know these three methods of grading;
his own based on empirical judgment,
the companies' based on usability, and
the Government's based on stalk
position.
What Is Quality?
So what is tobacco quality ? There
are many things that enter into qual-ity.
Some of these are obvious. Others
are difficult to understand and even
more difficult to describe. Tobacco
quality is a very real thing, the most
important factor in the acceptability
of a cigarette. Therefore, to meet the
quality problem, growers are plant-ing
recommended and approved seed
varieties, following cultural prac-tices
recommended by the Extension
Service, and striving to produce a
crop that has a high percentage of
ripe light-to-medium bodied tobacco
with good flavor and aroma and a
moderate level of nicotine. They are
presenting each lot in fairly well
sorted baskets and letting the buying
companies worry about quality.
12 ESC QUARTERLY
America's First Great Conwmm&
Text and Drawings
From the
TOBACCO
INSTITUTE, Inc.
X obacco grows in a good part of
the world but nowhere more abun-dantly
than in the United States.
America has been the major source
of the finest leaf since England's first
settlement here. It is a tribute to the
quality of the tobacco grown in the
States that it has never lost its para-mount
place as the most desirable
for cigarettes, smoking tobacco and
snuff.
Slightly over a fourth of the world
production of 9.1 billion pounds in
1962 came from the United States.
About two dozen states, located in the
South Atlantic, Eastern Central and
New England sections, have govern-ment
tobacco allotments. Generally,
tobacco ranks fourth in the overall
value of cash crops grown by Amer-ican
farmers. In 1962 it brought them
over $1.3 billion.
Domestic consumers represent by
far the largest market for American-grown
tobacco. Yet so much of it goes
abroad—around 28 percent of the 1962
world total of 1.7 billion pounds in
international commerce—that the
United States is the world's largest
leaf exporter. It has long held that
place. The 1962 leaf shipments were
worth $374,000,000, which ranks to-bacco
third in the dollar value of our
agricultural exports. Additionally,
over 24 billion cigarettes worth $106,-
300,000 went to foreign purchasers.
Other 1962 exports of tobacco com-modities
manufactured in the States
Ibrought the total value to $117,500,-
900.
No product of the fields has had so
Iramatic a history as tobacco. Its
'ecord is intimately related to most
)f the original colonies and the first
states to enter the Union.
PLANTERS AND BUYERS AT A LOUISVILLE WAREHOUSE AUCTION IN 1873.
This rich agriculture of America
began tentatively on a little farm in
Jamestown, just over 350 years ago.
The first crop was of a type new to
Virginia. Its seeds had been brought in
from the Spanish colonies of Trinidad
and Caracas.
The original planter of the import-ed
seeds was John Rolfe, whose ro-mance
and marriage with Pocahontas
in 1614 brought him popular fame.
His discovery that Virginia's soil
would produce a much-desired crop
had far-reaching consequences.
Four times in the preceding quar-ter
century Britain had attempted to
establish a settlement in the New
World. Virginia, the fifth attempt,
then England's only colony, was close
to failure. Its severe economic prob-lem
was solved through the ingenuity
of Rolfe. He was not only America's
first experimental agriculturist; he
was also responsible for the inception
of a great commerce.
The first shipment of leaf from
Rolfe's little Virginia farm went to
England in 1613. Though only a few
hundred pounds, London traders wel-comed
it for its quality and demanded
more. In consequence, production in-creased
progressively in Virginia. By
the end of the colonial period the to-bacco
colonies of Virginia, Maryland
and the Carolinas were exporting an
average 100 million pounds of leaf
annually.
Tobacco is one of the most difficult
crops to produce. The care it requires
in field management alone means that
farmers put in an average 350 hours
an acre for Burley; an average 450
hours for flue-cured types.
The yield of all tobacco types from
American farms in 1962 totaled over
2.3 billion pounds. Foremost in vol-ume
and in money value, as has been
true for a long time, is Bright (flue-cured)
leaf. The 1962 harvest was
more than 1.4 billion pounds grown in
six states, with a total crop value of
$846,123,000. For many years the
chief source of flue-cured tobacco, the
major ingredient in blended cigarettes,
has been North Carolina. Burley, also
an important constituent of domestic
cigarettes, is a product of eight states,
among which Kentucky grows the
largest quantity. The 1962 Burley har-vest
totaled 674,658,000 pounds and
brought almost $395,000,000 at auc-tion.
Some 750,000 American farm fam-ilies
engage in the production of to-bacco.
At the height of the growing
and harvesting seasons around three
million workers will be employed in
this agriculture.
At various times during the colo-nial
period tobacco was grown in all
the Atlantic seaboard colonies. The
chief concentration of this agriculture
was in Virginia and Maryland.
In these two colonies particularly,
the tobacco economy gave elasticity
to fi-ontiers. Farmers of the period
frequently lacked good fertilizers or
were careless in field management, but
they could afford to be agricultural
spendthrifts. With an axe and spade
as basic tools, a man could clear two
or three acres in the primeval forest
and plant a new crop in virgin soil.
The first colony in North America
founded for the chief purpose of pro-ducing
export tobacco was established
ESC QUARTERLY 13
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EARLIEST KNOWN ILLUSTRATION OF THE MARRIAGE OF ROLFE
AND POCAHONTAS, AS IMAGINED BY A FRENCH ARTIST IN 1755
The line drawings and outlines shown here and on the
following page were furnished by the Tobacco Institute
office in New York and have been previously repro-duced
in the Institute's "Tobacco, Pioneer in American
Industry," and "North Carolina and Tobacco" publica-tions.
ONLY THE "MOST REFINED YOUNG LADIES" WERE EMPLOYED
IN THIS CHEWING TOBACCO ESTABLISHMENT OF THE 1870's
14 ESC QUARTERLY
wm%
j^-j
EARLY METHODS OF SAMPLING TOBACCO LEAF (left) AND
STRIPPING TOBACCO LEAF
MARKET STREET IN THE PORT OF WILMINGTON ABOUT 1885
A TOBACCO SALESMAN AND HIS DRIVER ASSISTANT WORKING
THE TERRITORY IN WESTERN NEW YORK IN 1875
HAND ROLLERS AND OTHER WORKERS IN A RICHMOND CIGARETTE FACTORY,
EARLY 1880's.
IHl^ -_
'-= *-.£... -"^^ DURHAM-N-C
THE WELL KNOWN GLOBE TOBACCO WAREHOUSE OF LEA, WARREN & POPE
IN DURHAM, 1886.
in present Delaware by the Dutch in
1631. This project failed. George Cal-vert,
first Lord Baltimore, unsuccess-ful
in settling Newfoundland, asked
for a grant of land on the Chesapeake
where he "might do the King and
Country more service" by planting
tobacco. The tobacco settlement of
Maryland was established in 1634.
In tidewater Virginia and Mary-land
great, self-sustaining plantations
were being developed from the mid-dle
1650's on. The largest part of to-bacco
grown there came, however,
from the little farmers in the outly-ing
districts.
Virginians moved into the Albe-marle
area of Carolina in search of
better soil for tobacco while fellow-settlers
extended the borders of
Virginia colony into the Piedmont
and the Blue Ridge districts in the
17th century.
By the late 1700's these restless
planters were crossing into present
Tennessee and Kentucky, Ohio and
farther west, making permanent set-tlements
in new lands where they
could grow tobacco.
New Varieties
Inevitably, new varieties, each de-scendants
of Rolfe's experimental
plants, made their appearance. There
were several dozen types by the end
of the 17th century. Many of these
are still being grown.
Most important of the resultant
varieties was Bright tobacco, orig-inally
a native of the Virginia-North
Carolina border area.
This became the flue-cured tobac-co
of today. Also a major type is Bur-ley
which developed from a hybrid
that turned up in Ohio in 1864. Its
use was for some time confiend to the
tobacco commodity then most popular
:
chewing tobacco.
ESC QUARTERLY 15
Une of the first reactions to the
Report of the Advisory Committee to
the Surgeon General on Smoking and
Health, published last January 11,
was a temporary drop in United
States retail cigarette sales, but by
mid year these sales decreases demon-strated
healthy signs of recovery and
were only slightly off last year's all-time
record high.
Language of the Report of the Ad-visory
Committee was much stronger
than many leaders in the tobacco
economy expected, but many grass-roots
farm leaders did not panic.
They correctly predicted trends even
as wire services flashed the news to
newspapers, radio and television.
Fred S. Royster, a member of the
National Executive Committee of the
Tobacco Growers' Information Com-mittee,
Inc., said in an Associated
Press interview:
"It's reasonable to assume there
will be some immediate effect on the
tobacco industry," said Royster, who
is the Managing Director of the
Bright Belt Warehouse Association.
"But in the long run, pending more
conclusive scientific evidence, I do not
thing the report will have a material
effect."
No Different
From "Oaklyn Plantation," near
Darlington, S. C, B. Frank William-sonson
said: "The report doesn't make
smoking today or tomorrow any dif-ferent
than smoking was yesterday.
Many pleasures, if taken to excess
are damaging." Williamson said. "By
the time our markets open (in Aug-ust)
the thing will have settled
down."
Some of the conclusions in the Re-port
of the Advisory Committee, a
10-member group of scientists, were
far stronger than many tobacco
farmers had hoped. Dr. Luther L.
Terry, the U. S. Surgeon General, who
announced the conclusions of the ad-visory
body, said cigarette smoking is
a "health hazard" of importance "to
warrant remedial action."
Some tobacco leaders had hoped
that the report would not rely as
heavily as it did on statistical asso-ciation
studies; that it would take
greater cognizance of the world-wide
failure of many scientists to produce
lung cancers with tobacco smoke in
laboratory experimental animals, and
of the other lack of experimental sup-port
for the statistical charges.
The Advisory Committee report
gave small attention to the use of
filter cigarettes, although retailers re-port
over half the U. S. smokers pre-fer
filters.
Usefulness of Filters
U. S. Senator John S. Cooper, of
Kentucky, after studying the findings
of the 10-member committee, asked
the Surgeon General about the use-fulness
of filters.
Dr. Terry on January 14, according
to the Associated Press, replied to
Senator Cooper's question, and said it
"is erroneous to conclude that cig-arette
filters have no effect" and that
"filters in common use do remove a
variable portion of the tars and nico-tine."
The development of better filters or
more selective filters, according to
Dr. Terry provides, "a promising
avenue for further developments."
Retail sales of U. S. cigarettes
dropped sharply during the first quar-ter
of this year following the Advisory
Report, according to the U. S. Depart-ment
of Agriculture. There were some
states where losses exceeded 20 per-cent—
but these were not nearly as
severe as the initial cigarette sales
losses reported in England following
the 1962 Report of the Royal College
Long Active In Tobacco Research,
Industry Refutes Conclusions
Of Surgeon General's Report On
Smoking and Health
of Physicians and Surgeons.
By the end of the first week in
April, the Wall Street Journal re-ported
a survey of cigarette tax
revenue data in more than 20 states
showed cigarette sales rebounding
strongly.
California said its March cigarette
tax collections were up 3.6 percent
over the previous year, 1963, which
set all-time records. Rhode Island re-ported
a gain of 6.8 percent; Mary-land;
9.14 percent; New Jersey, al-most
three percent. A Wisconsin tax
agent said "It begins to look like the
effects of the scare are over, and
we're getting back to normal."
As could be expected, some smokers
turned to cigars and pipes. One of
the surprises was the trend by a
number of women smokers to small
pipes and little cigars.
"They're driving me crazy with
these women's pipes," said Pipe Manu-facturer
George Watnick in an inter-view
with Richard H. Hoenig, of the
Associated Press Business Staff. "I
can't make enough women's pipes,"
said Watnick. "We've got a backlog of
three months on orders. I've never
seen a surge of demand like this
—
I've been in the business since 1924."
Cigar Sales Up
Major cigar manufacturers readily
confirmed increased sales. E. Archie
Mishkin, president of Bayuk Cigar
Co., Philadelphia, said, "Our January
sales skyrocketed. February is even
better. It's that way all over the
country."
"There has been a tremendous
number of people trying cigars." re-ported
Harold Edeson, a General
Cigar Co. official. "There is a great
surge of interest in small cigars," he
said.
How accurate these April reports
were is confirmed in a New York
Times news article which said current
cigarette sales on June 30 were off
by 800 million packs following the Ad-visory
Committee Report to the Sur-geon
General. Quoting U. S. Depart-ment
of Agriculture officials, the
Times reported 1964 cigarette sales
as being about six percent below the
first six months of 1963 when all-time
records were posted.
Cigarette consumption in 1963 be-tween
July and December was about
6.5 billion units ahead of the level of
1962, the Times said. But from Jan-uary
until June of this year, The New
York Times said, the sales dropped by
16 billion units and wiped out the
earlier lead.
According to the U. S. Department
of Agriculture figures, cigarette con-sumption
by U. S. smokers and our
forces overseas from July 1, 1963 to
June 30, 1964 was 507 billion cigaret-tes.
This represented a two percent
16 ESC QUARTERLY
L
drop from the 1962-63 fiscal level, the
USDA said.
In an article entitled, "At the Half
Way Mark," the Western Tobacco
Journal reported healthy earnings re-ports
for the first six months of 1964
by two major cigar manufacturers.
Consolidated Cigar said its first six-month
sales were up over 20 per-cent
over 1963; General Cigar said its
sales were up over 51 percent.
Gains In Earnings
The major U. S. cigarette manufac-tures,
according to the Western To-bacco
Journal, reflected expected
dips in sales following the Surgeon
General's Report. First half 1964
figures varied. The Western Tobacco
Journal made this report on the sales
of the leaders: R. J. Reynolds, sales
off about 5 percent; American
Tobacco Co., sales up about 0.3 per-cent;
Philip Morris, Inc., sales up
5.8 percent; Liggett & Myers, sales
off about 0.6 percent, and P. Lorillard,
sales off about 11 percent.
All companies reported gains in
earnings, however. All tobacco securi-ties
quoted by Wall Street brokers
showed no signs of weakness. Many
reported new 1964 highs as investors
continued to buy tobacco issues.
Another research analyst, John C.
Maxwell, Jr., of W. E. Hutton & Co.,
told the United Press International
that sales of cigarettes for the first
six months were off 5.7 percent from
a year earlier. He said that the total
volume of sales for the first half of
1964 was 238.56 billion units.
The first six-month sales total was
greatly improved, the Maxwell re-port
said, because the second-quarter
1964 sales were down only 1.2 per-cent
from the record-breaking second
quarter 1963 sales. This, the Maxwell
report said, clearly demonstrated a
confidence by the smokers and a re-turn
to a more normal sales pattern.
The Maxwell report showed only
charcoal filter cigarettes as posting
gains for 1964. They were up 14.32
billion from 6.69 billion in 1963, the
United Press International said, with
Liggett & Myers' Lark rolling up the
biggest gain from 0.17 billion to 4.47
billion. Maxwell said the charcoal-filtered
cigarette share of the sales
market jumped from 2.6 percent to
6 percent.
Figures for the first six months, as
released by Dr. Clarence M. Weiner,
of the Cigar Manufacturers Associa-tion,
show a production gain of 33
percent. Little cigar sales were up
almost seven times to 865 million for
the first six months.
Pipe tobacco consumption is about
28 percent ahead of last year's figure,
according to the Pipe and Tobacco
Council. Imports of pipe tobacco are
reported to be up, and even snuff
sales were up a "percentage point or
two," and sales of chewing tobacco are
reportedly 10 percent or better than
last year.
Half Million Dollar Research
Meanwhile, research into the to-bacco-
and-health issue continued on
many fronts. The American Medical
Association, the nation's top profes-sional
body of physicians, last De-cember
(almost a month before the
Advisory Committee Report to the
Surgeon General ) announced that its
members were putting up a half mil-lion
dollars for independent research
into some of the aspects of smoking
and health. At the time of the an-nouncement,
the AMA voted to probe
"beyond statistical evidence."
Six major U. S. cigarette manufac-turers
last January announced a five-
(See IMPACT, page 88)
SMOKING SCAR
REPUDIATED BY
TOBACCO INFO MEN
By Bill Anderson
Chartered in June, 1958, at a Ra-leigh
meeting of the grass-roots rep-resentatives
of 27 farmer and
warehouse organizations, the Tobacco
Growers' Information Committee,
Inc., seeks to put true medical and
scientific information in the hands of
tobacco leaders in repudiating statis-tical
charges in the health contro-versy.
Carl T. Hicks, of Walstonburg, a
long-time Greene County farmer, was
elected President of the TGIC at for-mal
organization sessions, and has
been unanimously re-elected each year.
Hicks, who also is President of the
Flue-Cured Tobacco Cooperative Sta-
ANDERSON
CARL T. HICKS
bilization Corporation, Inc., always
has been outspoken in the tobacco-and-
health debate, and he has repeat-edly
pointed out to farmers that "all
in tobacco need to know the facts"
so as to repulse those who would de-stroy
the eight-billion dollar tobacco
economy.
"There is no new medical evidence
in the Report of the Advisory Com-mittee
to the U. S. Surgeon General,"
said Hicks. "This is merely a re-hash
of old statistical charges which will
not provide any proper answers to a
medical problem. The Report provid-ed
little attention to filters, and today
about 60 percent of the cigarettes
sold in this country are filters."
The TGIC today is supported by
over 40 farm and warehouse organi-zations
in the 20 principal tobacco-growing
states. Each of the major
states has its own executive commit-tee
which functions as a separate
entity in providing farm leaders with
the medical facts on the health issue.
The TGIC does not compete with
any organization for membership,
Hicks said, but rather functions
through the existing framework of
the principal grass-roots farm groups.
He said that the information now is
being distributed free to a mailing
list of over 44,000 concerned farm
leaders.
"The health issue concerns all in
tobacco," said Hicks. "It harms the
economic welfare of the tobacco farm-er
and the warehousemen. It hurts
the manufacturers and the wholesal-ers
and retailers, as well as the over-seas
dealers."
"I am confident, however, that re-search
will provide a clean bill of
health," Hicks said. "We need to know
what elements or constituents in to-bacco
could be harmful. Those making
reckless statistical charges and clahus
must identify those elements that
could be harmful to human health."
In add'tion to Hicks, other TGIC
officers: Vice-Presidents Adron Har-den,
of Zebulon, Ga., and David J.
Williams, of Richmond, Ky.; General
Counsel Col. William T. Joyner, of
Raleigh, N. C; and Secretary-Treas-urer
William H. W. (Bill) Anderson,
of Raleigh, N. C.
All members of the TGIC Board of
Directors are tobacco farmers. The
TGIC held its Sixth Annual
Meeting in Raleigh on November 2.
ESC QUARTERLY 17
FROM SEED TO SALE A HARD, YEAR 'ROUND JOB
By Raymond Umstead
Farm Placement Supervisor
Employment Security Commission
Tobacco used in the peace-pipe,
measured in friendship, was perhaps
more valuable than it is today when
value is measured in dollars and the
simplest task of the American Indian
has become the most difficult today.
(If the fungus does not get it, the
virus will.)
It has been said that tobacco is a
thirteen-month crop. Beginning early
in January the tobacco farmer begins
to prepare his plant beds. The back
breaking job of a few years ago of
preparing tobacco plant beds, when
land had to be cleared of all stumps,
roots, etc., by manual labor, passed
with the discovery of weed and grass
control chemicals. These chemicals
made it possible to get in open land
with plant beds. With the use of
methyl-bromide or similar chemicals
and plastic covers, the soil in the
plant bed is fumigated not only for
weed and grass control but for insect
and disease control. Before the plant
land can be gassed, it must be pul-verized
and have one and one-half to
two pounds of fertilizer per square
yard of plant land thoroughly mixed
with the soil. After a few days when
the fumes have left the top soil,
approximately 350,000 tobacco seed
are scattered over 4-600 square yards
of plant bed area. This amount rep-resents
one ounce of tobacco seed. The
hybrid seed of today are much smaller.
Grower Cautiously Observes
Now the survival of tobacco plants
begins. Before the tobacco seed
sprouts, the bed is covered with some
kind of material to protect the plants
from hard freezing and frost. This
cover material today is usually plas-tic.
It remains over the plants until
frost date is passed.
From this point on the grower cau-tiously
observes for insects, disease,
moisture and nutritional deficiencies.
It is from this effort and vigilance
that the grower hopes to set one acre
18 ESC QUARTERLY
at first setting per 100 square yards
which requires from 6,000 to 7,000
plants. Other plants on bed can grow
and be used to set spaces where orig-inal
plants failed to survive and also
for the use of the neighbors who may
not have been so fortunate.
The entire area must be sprayed
when the plants first appear, and
again when the leaves are about two
inches across, with parathion or DDT.
DDT is used again immediately before
pulling for re-setting in the field.
These treatment are to help control
various leaf and root eating insects.
The next step in the survival of the
tobacco plant takes place in the field,
which must be prepared to receive
the plant. After the soil has been
pulverized and laid off in rows, from
two to three thousand pounds of fer-tilizer
per acre, dependent upon the
analysis of the fertilizer and the type
of soil, is placed in bands called rows.
Then, as a precaution against insects
such as cutworms, mole crickets, wire-worms
and the often present diseases
called nematodes, black shank, brown
spot, etc., the soil in the field must be
treated eight to ten inches below the
soil level and a dirt seal must be pro-vided
immediately. Even this some-times
fails to control some of the
diseases known to the tobacco plant.
This leaves another alternative which
always helps, namely, resistant vari-eties
and crop rotation. If the plant is
weakened by some type of nematode,
it becomes more susceptible to dis-eases
common to the tobacco plant.
Since nematodes cannot reproduce
very rapidly when the soil tempera-ture
is below 60 degrees Fahrenheit,
they do not reproduce much between
November and March, but the larvae
will remain in the soil to attack the
new plant in the spring. In addition
to gassing previous to planting, the
farmer must upturn the soil in winter
and also rotate with nematode resist-ant
crops.
Just placing 2,000-3,000 pounds of
fertilizer per acre of tobacco is not
sufficient. For top quality tobacco and
high net return, fertilizer must be
properly applied. This calls for a fer-tilization
plan based on soil tests,
depth of topsoil, and amount of rain-fall.
This is not all. The farmer must
rely upon soil texture and drainage,
differences in varieties, the effects of
rotation, the quality of tobacco that
is in demand and past experience.
Decision Never Easy
Soon after tobacco is transplanted
in the field, irrigation sometimes be-comes
a big problem to the farmer,
and he must consider what his cash
return will be on his capital invest-ment.
Will he run the risk of a crop
failure due to dry weather or prepare
for irrigation as a form of insurance
In January the farmer prepares his plant bed. The cover protects the young plants
from hard freezing and frost. This is a crucial step for the tobacco grower.
Plants constantly have to be protected from weather, insects and diseases.
Approximately 350,000 tobacco seed are scattered over four to six hundred square
yards of plant bed area. This represents about one ounce of seed. One acre of
tobacco requires about six to seven thousand young plants, or the amount pro-duced
in approximately 100 square yards of plant bed. Not all plants survive.
The entire plant bed must be sprayed when plants first appear and again when
the plant leaves are about two inches in width with DDT or parathion. These
treatments help control various leaf and root eating insects. DDT is used again
before pulling plants for transplanting. The field also receives chemical treatment.
ESC QUARTERLY 19
against a total crop failure, or will
he invest his capital in some other
phase of his tobacco farming opera-tion?
This decision is never easy. In
making this decision he must con-sider
the fixed cost and operating
cost. Will it pay in his particular
operation? Is his acreage allotment
great enough to realize a substantial
return on his investment?
Disease and insect control in the
field is an ever present problem. Flea
bugs suck the leaves, bud worms cut
out the bud and cut worms cut it
down when it is small. If by chance
tobacco should survive and grow,
horn worms, which sometimes meas-ure
approximately three inches in
length, eat the entire leaves. For all
these insects, poisons must be ap-plied.
Even then a highly contagious
virus that is spread by contact may
affect the plant and cause a mosaic
condition which produces an undesir-able
type of tobacco. Milk, sprayed
on plants at transplanting time will
greatly reduce mosaic loss.
Sucker Control
As the tobacco plant grows, suck-ers
appear on the stalk at base of the
leaves. These must be stopped from
growing by use of chemicals or pulled
out by hand. If the suckers are al-lowed
to grow, the quality and weight
of the leaves will be decreased by
20-25 percent.
Another mile post is to get the
leaves off the tobacco plant and placed
in the curing barn. Workers take
from two to four leaves at a time,
starting at the bottom and working
up the plant to the top, as the season
progresses, with six to seven weeks
to complete the plant. If the stick
method is used, three to four leaves
are put in bunches and tied on each
side of stick, ranging from 18-28
bunches per stick. These sticks are
placed in the curing barn, approxi-mately
the length of a man's hand
apart on tear poles, which are ap-proximately
two feet apart placed
one over the other.
Curing tobacco, like many other
stages of growing and marketing, can
be the time when a profit is made or
just another year of exercise is expe-rienced.
The objective in curing tobacco is
to preserve the leaf by timely drying-while
retaining the potential quality
of the cured leaf. Tobacco curing,
then, is more than drying the leaf.
It involves chemical and physical
changes which are necessary for high
quality tobacco suitable for manufac-turer
and consumer acceptance. In
curing tobacco, the farmer strives to
maintain life within the leaf until
certain biological processes take place
(yellowing stage), stop biochemical
and enzymatic activity by timely re-moval
of leaf moisture (color setting-stage),
and preserve the leaf by com-plete
drying (killing out stage).
Heat is put in the barn and the
temperature is usually begun five to
eight degrees Fahrenheit above out-side
temperature. This temperature is
held steady or varied according to the
need to obtain each objective in the
process of curing, dependent upon hu-midity
in and outside of barn, texture
of the leaf, reaction of leaf to heat,
and moisture in and on leaf, until
approximately 170-175 degrees Fahr-enheit
is reached and the complete
leaf is drying. This process takes ap-proximately
four days.
Last Stage
Handling and preparing flue-cured
tobacco for the market is the last
stage. Even at this stage much cau-tion
and care must be taken by the
farmer in order to show a profit for
his year's work. The tobacco must be
sorted. Green leaves, red leaves, thin
leaves, heavy leaves, short leaves and
all foreign matter must be separated
from the better leaves. Then the bet-ter
leaves are sorted into lugs, cut-ters,
leaf, wrappers, nondescript and
scrap, with sub-groups of smoking
leaf and primings. During all of the
sorting period, moisture in the leaf
must be controlled.
Perhaps the most exciting time dur-ing
the growth and production of to-bacco
is the chant of the auctioneer
on the tobacco auction warehouse
floor. Then one wonders where all
this tobacco goes and what use is
made of it. Approximately two-thirds
of our tobacco is used in domestic
trade in the United States. The other
one-third is exported to other coun-tries.
Yet there are several foreign
countries bidding for foreign trade in
tobacco where our exported tobacco
is sold. Tobacco is being grown in the
following countries: Canada, Brazil,
Rhodesia and Nyasaland, China, In-dia,
Indonesia, Philippines and Thai-land.
Most of these foreign countries
export tobacco. Approximately one-half
of all tobacco exported by all
countries is exported by the United
States. Whether this export trade will
increase or decrease will be greatly
dependent upon how the tobacco is
grown and cared for by the tobacco
farmer. At home, manufactured tobac-co
is being decreased by use of the fil-ter
in cigarettes, and in order to keep
up good relations with foreign coun-tries
more oriental tobacco is being
used by the American tobacco manu-facturers.
Where does all of this leave the
farmer? After battling the weather,
tobacco diseases, insects and rising-cost
in his entire operation, he has to
worry about battling the market at
home and abroad.
NOTE: The author of this article
has grown tobacco most of his life
and has worked in its production in
Florida, Georgia, North Carolina and
Canada.
A good stand of toboeco (left) right before priming. Curing tobacco (right) can be the time when profit is made or just another year of experi-ence.
Curing tobacco in barns such as these usually requires about four days with inside heat eventually reaching about 170 degrees fahrenheit.
20 ESC QUARTERLY
By Hugh C. Kiger
Foreign Agricultural
Service, USDA
WITH LARGE SUPPLY OF COMPETITIVE
TOBACCO AVAILABLE, WORLD TRADE
ENJOYS A BUYER'S MARKET
Tobacco has played a key role in
both the history and export trade of
North Carolina and the United States.
The shipment of tobacco from James-town
by John Rolfe over 350 years ago
marked the beginning of international
trade in this country.
Over the years the United States
has played a dominant role in all
phases of tobacco activity and is now
the largest tobacco producing and ex-porting
country in the world. The
United States produces over 20 per-cent
of the tobacco grown in the
world and exports almost one-third
of the tobacco moving in world trade.
The United States now produces
about one-half of the free-world crop
of flue-cured tobacco of about 2.6
million pounds. We export about one-half
of the 800 million pounds of flue-cured
leaf sold annually on the world
market.
N. C. Exports $300 Million
A healthy and expanding export
market is of vital importance to flue-cured
tobacco producers and export-ers
as well as to the many thousands
of people engaged in all aspects of
the industry in the United States.
About 40 percent of the flue-cured
crop moves to overseas markets in
the form of leaf and tobacco products.
Thus, the export market provides an
outlet for the output of two of every
five acres in the flue-cured area.
In the last marketing year, exports
of flue-cured tobacco totaled some 426
million pounds (export weight), with
a valuation of $347 million. It is esti-mated
that North Carolina accounted
for about two-thirds of the total flue-cured
exports in the past marketing
year. This quantity (284 million
pounds) had an export value of about
$231 million. In addition, exports of
burley tobacco that may be attrib-uted
to North Carolina would have
been valued at almost $2 million.
Last year the United States export-ed
over $100 million worth of cigar-ettes.
It is estimated that North Caro-lina
factories produce about 60 per-cent
of the cigarettes manufactured in
this country. Consequently, the value
of cigarette exports that may be at-tributed
to North Carolina would have
been about $60 million last year.
Thus, the estimated value of to-bacco
and tobacco products exported
from North Carolina last year was
almost $300 million. This is big money
in any language and illustrates the
importance of tobacco exports to the
numerous growers, warehousemen,
truckers, dealers, manufacturers, la-borers,
and others connected with the
industry.
In fiscal 1964, U. S. exports of un-manufactured
tobacco reached 532
million pounds (export weight)—one-eighth
larger than in fiscal 1963. The
value, at about $421 million, set a
new record. Most of the gain last
year was in flue-cured leaf, exports
of which totaled about 426 million
pounds—up 15 percent from the 370
million pounds shipped out in the
previous year. This sizable increase
reflects the considerable improvement
in quality of the 1963 crop.
'65 Exports Lower
For various reasons, however, it
now appears that fiscal 1965 exports
may fall below those of the past year.
Specifically, there is a buyer's market
as far as world trade is concerned,
and large supplies of competitive to-baccos
are available for export move-ment,
at prices generally below those
for comparable grades of U. S. to-baccos.
On the other hand, there are a num-ber
of factors tending to keep U. S.
tobaccos moving abroad at satisfac-tory
levels. I might mention first the
world output of cigarettes. This is a
key factor in affecting the trend in
world tobacco trade in light types of
tobacco.
We have a golden opportunity to
share in the increasing cigarette con-
ESC QUARTERLY 21
HUGH C. KIGER, Director of the
Tobacco Division of the USDA
Foreign Agricultural Service, has
traveled extensively in Europe, Africa,
the Middle East and Far East to
develop markets for U. S. tobacco. He
has served as a member of a USDA
task force to make recommendations
regarding development of foreign
markets. A native of Winston-Salem,
Kiger received his BS degree in Agri-cultural
Economics from N. C. State
College. Attending graduate school at
State and the University of North
Carolina, he received his Ph.D. degree
in 19If9. During his graduate studies
Kiger was awarded a fellowship by
the General Education Board of the
Rockefeller Foundation and taught
agricultural economics and cotton and
tobacco marketing at N. C. State. A
Marine veteran of the Pacific theater
during WWII, Kiger has served as
the Foreign Agricultural Service's
Tobacco Division Director since May,
1961.
Prior to this assignment he was
Chief of the Division's Foreign
Marketing Branch. Kiger initially
joined the U. S. Department of Agri-culture
in 1949 and is the author of
many articles on tobacco marketing.
sumption around the world. World
cigarette output is steadily rising,
and in 1963 exceeded 2,400 billion
pieces. This was half again as large
as in the early 1950's. Even with the
smaller rate of increase which has
become evident in the past several
years, by 1975 world production of
cigarettes may be nearly one-fourth
larger than the output of 1963.
Increased world cigarette output
will mean larger world production of
flue-cured tobacco, and larger inter-national
trade for flue-cured. Gains
will be made, however, chiefly by
those countries which make maximum
efforts to maintain and improve the
quality of their product and have
tobacco to sell at relatively attractive
prices.
Improving economic conditions in
most of the major flue-cured import-ing
countries will mean a bigger de-mand
for better-quality cigarettes.
These cigarettes will necessarily con-tain
large percentages of flue-cured
tobaccos. We can share in this de-mand
if we are able to supply the
grades of leaf desired by foreign
manufacturers at reasonable prices.
Many Export Problems
Although the U. S. share in world
flue-cured exports has dropped sub-stantially
since the end of World War
II, we still have about one-half of the
total trade. If we desire to maintain
or improve our position as the world's
leading exporter, we must make vig-orous
efforts to grow the quality of
leaf desired by foreign markets. This
is vital to the farmers, warehousemen,
dealers—all the people of this state.
For we are competing with other pro-ducing
countries which are leaving no
stone unturned to produce tobacco
desired by importing countries. And
they are having considerable success.
In spite of these favorable influ-ences
just mentioned, there are nu-merous
problems confronting us in
our efforts to export more flue-cured
tobacco. All major Free World pro-ducers
are striving mightily to im-prove
their positions as growers and
exporters. During 1950-54, Free World
production of flue-cured averaged two
billion pounds, with the U. S. crop
accounting for two-thirds. Last year,
the U. S. crop accounted for only
about 50 percent of the total.
The Rhodesias, particularly, have
achieved striking gains in production
The harvest in Southern Rhodesia
this year amounted to more than 300
million pounds—up 50 percent from
the small 1963 crop, and far above the
average of recent years. Canada has
stepped-up its production in recent
years, although in 1964 a cutback was
made in plantings because of an ex-cess
accumulation of supplies. India
is another country which has sharply
increased its production of flue-cured
leaf in recent years. Others include
Japan, Brazil, Pakistan, the Philip-pines,
and Australia. In the Philip-pines,
there are about 250 million
pounds of surplus flue-cured leaf
which is being offered to world mar-kets
at comparatively low prices.
Trade Restrictions
The growing availability of com-petitive
supplies is further compli-cated
by the effects of various trade
restrictions on U. S. export trade.
These trade barriers include monopo-listic
controls on imports, licensing,
preferential tariffs, etc. Among the
most important are the United King-dom's
duty preference on imports of
leaf from Commonwealth areas (in-cluding
the Rhodesias, Canada, and
India) and Australia's duty conces-sion
on imported leaf which is to be
blended with minimum percentages of
domestically grown tobaccos.
The United Kingdom's duty prefer-ence
of 21.5 cents per pound on Com-monwealth
leaf has assisted the Rho-desias,
India and Canada to cut
sharply into the U. S. share of the
big U. K. market; the Australian
duty concession has encouraged larger
use of domestic leaf, following rises
in the required use of Australian to-bacco
to obtain benefit of the con-cession.
In the Philippines, formerly a large
market for U. S. flue-cured tobacco,
regulations make it virtually impos-sible
for manufacturers there to pur-chase
any significant quantities of
U. S. tobaccos for blending purposes.
In addition to the impact of larger
competitive supplies and trade re-strictions,
recent publicity on tobacco
and health has reduced tobacco con-sumption
in some countries. It is too
early to assess the full effect of this
publicity. But it is an added un-favorable
influence on the level of U.
S. exports. At the least, it will tend to
retard the rate of increase in use of
tobacco by foreign manufacturers in
some markets abroad.
More Attractive Buy
Another important problem faces
us in our attempts to market flue-cured
tobacco abroad, especially in
areas where manufacturers must con-sider
carefully their costs of leaf to-bacco
and other raw materials. Com-parative
export prices for flue-cured
tobaccos available from the various
producing countries are an important
factor in their purchase plans. The
current marketings in Southern Rho-desia
are selling at an average of
about 33 cents per pound, compared
with 49 cents last year, and make
Rhodesian leaf a most attractive buy
to countries in Western Europe.
In 1963, average export prices for
U. S. flue-cured tobaccos were 82
cents per pound. For Southern Rho-desia
the average was 63 cents, for
India 36 cents, and for Canada 72
cents.
In countries where cigarette manu-facturers
place emphasis on price
rather than quality, this big differen-tial
between U. S. tobacco and other
growths is an important factor limit-ing
U. S. trade.
22 ESC QUARTERLY
Marketing Lagging
The United States leads the world
in tobacco production. But abundant
production is not marketing. Our ef-forts
to improve marketing have not
kept pace with our production ef-forts.
Expanding and maintaining export
markets call for positive actions and
attitudes. Some of the things that may
be done to help encourage exports of
tobacco are the following
:
Improve The Quality of U. S. Leaf.
Some of our foreign customers have
complained about a decline in the
quality of our flue-cured leaf, parti-cularly
the 1962 crop. This was re-flected
in lower exports from the 1962
crop of tobacco.
Considerable improvement in qua-lity
was noticeable in the 1963 flue-cured
crop. It now appears that the
1964 will be a high quality crop.
We will produce the highest quality
leaf in the world. However, foreign
competitors are making progress
in improving their quality. Thus, we
need to continue to emphasize pro-duction
of quality leaf.
Trade Liberalization. Tobacco is
probably subjected to more artificial
trade barriers than any commodity
moving in international trade. These
barriers constitute one of the major
obstacles to the expansion of foreign
markets for tobacco.
A basic objective in the develop-ment
of foreign markets for tobacco
is to secure the reduction or removal
of such barriers. This is primarily a
responsibility of Government, but im-portant
contributions can be and have
been made by tobacco trade and pro-ducer
groups.
Trade policies that give our tobac-co
maximum access to foreign mar-kets
are, and will continue to be, es-sential
to our tobacco farmers as well
as all other segments of the industry.
This is true whether we are speaking
of North Carolina or any other to-bacco
area across the United States.
Sales For Dollars. Tobacco is one of
the major agricultural commodities
sold for dollars on the export market.
It has been an important factor in our
balance of payments program.
During the past 10 years about
seven-eights of our export sales of
leaf tobacco have been for dollars.
We need to continue to emphasize
maximum sales for dollars and use
special trade programs where needed
to boost sales.
Trade Programs. Many friendly
foreign countries do not have the
necessary dollars or credit facilities
with which to purchase their require-ments
of U. S. leaf. To increase sales
to such countries, during the past
ten years, about 650 million pounds
have been exported under trade pro-grams
such as P.L. 480. Such sales
have been "in addition" to normal
sales for dollars.
Efforts should be continued to make
maximum use of all special govern-ment
trade programs to increase to-bacco
exports whenever feasible.
New Markets. The United States
sells tobacco to most countries in the
world; however, we need to contin-uously
be alert to opportunities for
development of rew markets. Through
the use of special trade programs we
have recently developed new (post
World War II) markets for U. S. to-bacco
in Polar d and Iraq.
Special efforts should continue to
be made to expand established mar-kets
and to develop new markets,
ir eluding markets in the Soviet Bloc
countries.
Public Relations and Education.
Much has been said and written
recently, especially by our foreign
competitors, about tobacco's problems
and what's wrong with our leaf.
Throughout the world we need to
do a better job of emphasizing the
fine qualities and characteristics of
our tobacco and tell the story of
"what's right" regarding our tobacco.
There is a continuing public relations
and education job with foreign to-bacco
importers. Key aspects of this
public relations job includes (1) em-phasis
on quality and outstanding-characteristics
and merits of U. S.
leaf; (2) pointing out that we have
extensive research programs which
help assure good tobacco for the ex-port
market; (3) emphasizing the
large number of U. S. exporters who
are ready to fulfill the exacting needs
of foreign customers; (4) indicating
that our stable government and inven-tory
of large supplies of high quality
leaf assure foreign importers of a
good and continuous source of high
quality leaf; (5) pointing out that
the U. S. has a liberal trade policy
and recognizes that foreign trade is
a two-way street; (6) emphasizing
the fact that we have many special
trade programs under which tobacco
may be purchased; (7) indicating
that U. S. tobacco trade associations
are anxious to work v/ith importing
countries in a cooperative effort to
increase the consumption of tobacco
products containing U. S. leaf.
Competitive Pricing. Higher quality
U. S. tobacco is generally competitive
pricewise with better quality leaf
grown in foreign countries. However,
prices of our medium and lower qual-ity
flue-cured leaf is considerably
higher than such leaf from competing
countries. During the past few years
lower-priced flue-cured leaf from com-peting
countries has accounted for
the gains that have been made in
sales on the world market.
We need to continuously study U. S.
export pricing and ways and means of
keeping our leaf competitive.
Maintaining and expanding tobacco
exports are vital to the prosperity of
North Carolina. All North Carolina
people who have an interest in to-bacco—
whether farmers or business
men associated with tobacco—need to
follow foreign trade developments
with interest and with comprehension.
FLUE-CURED TOBACCO: ESTIMATED
FREE WORLD EXPORTS
{Declared Weight)
MILLION POUNDS
CANADA
Total free world
\
1950-54 1955-59 1960 1961 1962 1963 1964
Averages
FLUE-CURED TOBACCO: ESTIMATED FREE
WORLD PRODUCTION
(Form-So/es Weight)
MILLION POUNDS
1,750- fOthers
India
Canada
Rhodesian Federation
1950-54 1955-59 1960 1961
Averages
1962 1963 1964
ESC QUARTERLY 23
TOBACCO ASSOCIATES SEEK TRADE
RELATIONSHIPS IN FLUE CURED LEAF
By John D. Palmer
President, Tobacco Associates, Inc.
The purpose and goal of Tobacco
Associates may be stated quite sim-ply
: to promote and encourage the
sales of American flue-cured tobacco
in markets overseas. It is not a
"sales" organization in the usual
sense of the word, as it neither offers
tobacco, nor makes contracts between
buyers and sellers as is normal in
trade circles. One of its functions is
to assist the seller in this country and
the buyer abroad in bringing about a
trade relationship in flue-cured tobac-co.
Another is promotional work
through advertising of specific ciga-rette
brands manufactured abroad
containing American tobacco; and still
another the bringing of overseas buy-ers
to this country in order to inti-mately
acquaint them with American
tobacco and the facilities available in
this country for servicing their needs.
There are several different ap-proaches
to that work which we in
Tobacco Associates will follow.
The Warehouseman
First, there are the tobacco auction
warehousemen with whom the closest
possible liaison is practically indis-pensible
if the Tobacco Associates is
to attain its full objectives. It is one
of those self-evident truths that in
the tobacco business the auction
warehouse literally stands at the
cross roads of the industry; a sort
of Rome to which all other roads lead
:
to it every producer must come to sell,
and to it every processor must come
to buy. It follows, then, that the
warehouseman, more so than anyone
else, is uniquely situated to collect a
vast and useful store of information
from both sides of the fence, as it
were, from the seller and from the
buyer and from many other sources
which are auxiliary to the industry.
His is a vantage point, an observa-tion
post from which he may look in
many different directions. It is to
him, therefore, that the farmer turns
more often than elsewhere for guid-ance.
With it goes a heavy responsi-bility
stemming from the simple fact
that the warehousemen can exert a
tremendous influence in the whole
matter of production, handling, grad-ing,
and what-not from seed-bed to
auction floor. Given that situation and
those conditions we intend to draw
heavily on the warehousemen as in-dividuals,
as well as through the
warehouse association.
Reciprocally, we propose to reverse
the process, and feed back to them
frequently the findings of Tobacco
Associates ; its activities, operations,
plans, and projects to the end that
such information may be widely dis-seminated
throughout all flue-cured
belts.
An Explosive Situation
I have long felt, and I am more
convinced today than ever before that
because accurate information was not
freely available on the state of the
industry—or was not properly inter-preted
to all those concerned—we find
ourselves in the present dangerous,
explosive situation.
Mr. Horace D. Godfrey recognized
that deficiency in setting up the
"Tobacco in Focus" meetings held
early this year. The extent of the
farmer's concern and his thirst for
information was abundantly demons-strated
at each meeting and particu-larly
in Wilson, North Carolina,
where upward of a thousand persons
attended and 90 percent of them
stayed for the entire session.
In connection with the foregoing, I
think you may be interested in know-ing
something of my thoughts with
respect to office locations and activit-ies
of Tobacco Associates personnel.
The main office of Tobacco Associ-ates
is, and will continue to be, in
Washington. It will be staffed, as
heretofore, with competent, perman-ent
personnel. For my part, I shall
spend as much time there, and for
periods as long as are desirable as
individual circumstance either war-
24 ESC QUARTERLY
I
rant or necessitate. When the parti-cular
work in hand has been accom-plished,
I shall then shake the rust
of the Capital off my feet and go
wherever there is anything afoot, or
wherever action may be initiated in
advancing the goal and purpose of
Tobacco Associates.
I shall spend a considerable amount
of time in the flue-cured area. I have
just pointed out the necessity of a
close, continuous contact with ware-housemen.
Of high and vital impor-tance
is a similar relationship with
other organizations in the bright belt.
There is the Stabilization Corpora-tion
with offices in Raleigh around
which the support program revolves.
Of its own volition, and not because
of any restriction in its by-laws,
Stabilization has strictly limited its
sphere of activity to the sole business
of arranging the processing, redry-ing,
packing, and storing of loan
tobacco. It has done so entirely with-in
the framework of privately owned
facilities. During its 18 years of
operation it has not infringed one
fraction of an inch on the trading
territory of dealers and exporters.
Under such self-imposed conditions —self-imposed for the clear purpose
of not disrupting traditional trading
and operating channels—it not only
behooves but becomes the unmistak-able
duty of Tobacco Associates to be
acquainted in detail with loan stocks;
not merely that Stabilization holds
such and such a total quantity, but a
breakdown as to grades and the most
likely outlets for them in the world
market. Tobacco Associates should be
acquainted with Stabilization's own
policies regarding that stock and with
its intentions concerning the handling
of future crops such as arose with
the advent of loose leaf sales outside
type 14 markets. In brief, to be so
equipped with facts concerning its
operations that when the occasion
arises, or when Tobacco Associates
can aid in creating the occasion, its
good offices may come into play in-stantly
if needed as intermediary be-tween
the Corporation and the buyer,
or whatever other party may be in-volved.
Market Potential
Second, there are the dealer and
exporting companies, the vast major-ity
of which are located in North
Carolina and Virginia. They are the
salesmen who are constantly travel-ling
the face of the earth and ac-cumulating
data on the potential of
markets. Assembled and fitted to-gether,
such information can become
the basis of concerted action for ex-panding
present markets and open-ing
new ones with the assistance of
P. L. 480, Barter, and A.I.D. pro-grams.
Also in North Carolina and Vir-ginia
are the leaf organizations of
the domestic companies, of Imperial
and Gallaher of Great Britian, of the
Swedish and the Japanese Monopol-ies,
and of the giant British-American
organization. As with the other groups
I have already mentioned, a continu-ous
contact and exchange of informa-tion
with these organizations can
produce extremely beneficial results,
not only in terms of disposing of the
present surplus, but in achieving what
is by long and far the most important
goal of all: preventing forever a re-currence
of today's situation when
nearly 700 million pounds of flue-cured
are held under loan.
Were I to attempt to spell out just
what increases we shall make in the
foreign field, I would be guilty of
rank speculation. In areas such as the
United Kingdom, we may not expect
more than will be generated by in-creases
in the smoking population or
by increased per capita usage. In
others, there is great possibility, and
to illustrate let me cite Western Ger-many.
Pre-war, our exports there
averaged four million pounds an-nually
from 1935 to 1939. The 1963
figure was 73 million, an increase of
1800 percent. Why? Because the
smoking habits and tastes of an entire
nation were radically changed from
a preference for Oriental types to a
variation of our blended cigarette.
Admittedly, there are but few Ger-manies,
but when we consider what
has taken place there, as well as in
our post-war exports to Japan, we
must also admit that history has a
way of repeating itself from time to
time in other places, and we must
work on the assumption that it will
by aiding and abetting history to the
utmost.
China Market Lost
From an entirely different ap-proach,
consider the case of Red
China. I think I am correct in say-ing
that for many years prior to
1934, China was second only in im-portance
to the United Kingdom, as a
user of our tobacco. Now in all pro-bability
we may never recover that
position, but the sad and sorry fact,
yes, the tragic fact, is that today not
one leaf of our tobacco may legally be
sold and shipped there. That is a
paradoxical, an intolerable situation,
for here is a former market that
might well be an important present
market for the most non-strategic
material imaginable, but from which
we are utterly barred by U. S. trade
restrictions, while our closest allies
and other nations of the world are
trading with China in every article of
commerce from soup to nuts!
It will be no easy task to maintain
our present level of exports and to
share proportionately in markets
abroad as the usage of tobacco in-creases
in the years ahead. We can
guarantee nothing, but we can and
do promise, in Churchill's words,
"toil and sweat," both mental and
physical, an incessant and relent-less
effort in obtaining our rightful
share of world trade in tobacco; and
we look to the day when our ancient
and honorable industry rests upon a
sound, economic footing in this coun-try.
| JOHN D. PALMER, Executive Vice
{President and Board member of tin
\Jas. I. Miller Tobacco Company of
YWilsoji, was unanimously elected
YPresident of Tobacco Associates in
[June, 196k.
A 36-year veteran of the tobacco
\industry, Palmer joined the Wilson
Company in 1931 and was subse-quently
sent to Shanghai, China, as
Manager of the organization's branch
office. After overseas residence, he
returned to the States and entered
\the Army in 191+2. After the war he
\traveled annually in Europe, the Far
past and in South America on behalf
of the Miller Company. A native of
Bennettsville, S. C, Palmer has served
as President of the Tobacco Associa-tion
of the United States, 1958-59; a
Member, Board of Governors, Tobac-co
Association, U. S.; President, Leaf
Tobacco Exporters Association, 1960-
62; Chairman of the Leaf Tobacco
Exporters Association's Executive
Committee; and as a Member of the
National Tobacco Industry Advisory
Council under appointment of Secre-tary
of Agriculture Freeman. He is
recognized as one of our State's fore-most
tobacco authorities and attended
the University of North Carolina.
ESC QUARTERLY 25
Impact Of Tobacco On North
Carolina Economy "Inestimable"
By Pauline Decosta
Director, Publications Division
N. C. Department of Agriculture
Throughout the history of this
country, tobacco has had a rather
unique relationship to the national
economy, both as a medium of ex-change
and as a source of farm and
non-farm income.
As the chief export commodity, to-bacco
served to give some economic
stability to the early American col-onies.
It was also a major medium
of exchange within the colonies, be-ing
used to pay for anything from a
gallon of rum to a wedding or a fu-neral.
Prices in terms of pounds of
tobacco were more or less standard
for many goods and services.
A barter economy in such a raw
new land is, of course, not surprising
—although it is perhaps somewhat
surprising that tobacco, then so rela-tively
new in world trade channels,
should have been both a chief export
as well as "commodity money" at that
period in history. More noteworthy,
however, is the fact that American
tobacco has persisted as a substitute
for currency throughout the centuries.
For two years after the end of World
War II in Europe, American cigar-ettes
were the only stable currency
in the retail markets of several Euro-pean
countries. American G.I.'s find
even today that they can in many
countries buy a wide range of com-modities
at standard prices of so
many packs of American cigarettes
per unit.
It is possible that very few people —even in North Carolina, the number
one tobacco state—have any idea of
all the ramifications of tobacco's im-pact
on local and national economy.
A breakdown of what tobacco means
to some segments of the economy is
sufficient to show how widespread the
total impact must be. Not all of the
figures cited in this article can be
broken down to show how they relate
to North Carolina alone. However,
even the national figures serve to give
some indication of North Carolina's
stake in tobacco as it relates to the
over-all economy.
Fifth Largest U. S. Crop
In 1962 some 750,000 American
farm families in 18 states received
a little more than 1.3 billion dollars
for the sale of their tobacco crops.
In North Carolina, which produced 41
percent of the nation's crop, tobacco
was grown on 138,000 farms and
brought in cash farm receipts of more
than $552 million.
Tobacco was the fifth largest cash
crop in the nation, and ranked second
in value of all agricultural exports.
America's cash farm income from to-bacco
exceeded the total for all truck
crops grown in the entire nation. This
farm income from tobacco represented
eight percent of the total for all crops
in the United States, yet tobacco was
grown on only about four-tenths of
one percent of the nation's cropland.
However, in North Carolina tobacco
accounted for 48% percent of the
total cash farm income from all com-modities,
and 69 percent of the total
cash income from crops, yet still oc-cupied
only about eight percent of
the state's cropland.
Tobacco production costs are rela-tively
high for both materials and
labor. Estimates indicate that Ameri-can
farmers paid $155 million for
hired labor in the production and
curing of tobacco in 1962, more than
$70 million in North Carolina alone.
For other expenses in tobacco produc-tion
and marketing, American farm-ers
paid more than half a billion dol-lars,
and nearly $220 million—over
half this national total—was paid by
North Carolina farmers.
To the fertilizer and lime industry,
tobacco production means about $70
million a year. North Carolina to-bacco
growers spend about $30 mil-lion
a year for these commodities, and
North Carolina manufacturers receive
At $5 to $15 an ounce, growers spend
about $1.5 million each year for seed.
fully $25 million a year for tobacco
fertilizer.
Pesticides used in producing the
nation's tobacco means $20 million
to $30 million a year to that industry.
The petroleum industry derives ap-proximately
$70 million a year from
the fuel used in curing tobacco. The
textile industry shares in tobacco pro-duction
expenditures. Farmers spend
about $8 million a year for tobacco
plant bed cloth.
Twine used for tying tobacco runs
about $2.5 million a year, and a simi-lar
amount is spent for plastic covers
used in plant bed fumigation. About
$1.5 million is spent each year for
tobacco seed. Tobacco warehouse com-missions
amount to at least $40 mil-lion
a year, over $16 million in North
Carolina.
The nation's farmers spend about
$11 million annually for tobacco curer
replacements, and it is likely that a
large proportion of this is spent here
in North Carolina, since ten of the 16
manufacturers of tobacco curers are i
located in this state.
Total Impact Inestimable
These are by no means all of the
businesses and industries that have a
big economic stake in the production J
and marketing of tobacco. For in-j
stance, this crop must provide sub-stantial
revenue to banks and other
financial institutions, since most to-bacco
farmers require production
financing from planting to harvest.
Figures are not readily available
for making sound estimates of what
this crops means to the forest indus-tries
that produce tobacco sticks and
baskets, nor for depreciation or re-placement
of farm trucks and ma-chinery
that can be charged solely to
the production of tobacco. Compared
with other modern farm production,
tobacco has not been a highly mecha-nized
crop; but it is now moving in
that direction and investment in to-bacco
planters, harvesters, and bulk
26 ESC QUARTERLY
Tobacco warehouse commissions amount to more than $16 mil-lion
a year in North Carolina, about $40 million for the nation.
Carolina Nitrogen's new plant near Wilmington. Tobacco growers
spend about $70 million yearly for fertilizer and lime and Tar
Heel consumption of plant food products is about $30 million.
Tobacco production is headed toward complete mechanization. Invest-ment
in planters, harvesters and bulk curing barns will figure in the
future. Shown above is a type of tobacco harvester currently in use.
Even the wood products industry shares in the income generated by the tobacco
industry. Wood products are used in hogsheads and cases for shipping the leaf,
tobacco sticks and baskets. About $25 million in cigarette paper is used.
curing- bains will probably figure
much larger in the future.
The foregoing has dealt only with
tobacco farm income and the income
generated in producing the crop, get-ting
it to the sales warehouse and into
the custody of the manufacturers or
exporters who buy the leaf. Impres-sive
as these figures are, they repre-sent
only a fraction of tobacco's
economic significance.
American tobacco manufacturers in
1961 gave employment to nearly 79,-
000 people whose wages totaled $323
dollars. Value added to tobacco by
manufacture was nearly $1.6 billion.
In North Carolina 32,400 people were
employed in tobacco manufacturing
plants, and their wages totaled more
than $123 million.
As is the case with tobacco produc-tion,
the processing of the leaf gene-rates
employment and sizable incomes
for other industries.
The transportation of tobacco with-in
the borders of continental United
States is conservatively estimated at
$79 million a year.
Manufacturers pay approximately
$25 million a year for cigarette paper
and, incidentally, this is almost en-tirely
a North Carolina industry.
Tobacco advertising amounts to
about $200 million a year in direct
payments to television and radio sta-tions,
magazines, newspapers and
outdoor advertisers.
What tobacco manufacturing means
to some other industries can be cited
only in terms of quantity, not dollars
and cents. Tobacco manufacturers
used about 40 million pounds of cello-phane
in 1961 and approximately 71
million pounds of aluminum foil. Only
general familiarity with these light-weight
materials is needed to give
some idea of how many square yards
of them it would take to make a
pound; and knowledge of their cost
at the retail level is sufficient to in-dicate
the magnitude of tobacco manu-facturers'
expenditures for them,
even when allowance is made for
what must be a drastically lower
price for purchases in such quantity.
Even a quantitative figure for other
paper used in packaging cigarettes
and for cigarette cartons is unavail-able.
But American manufactux-ers
produced nearly 27 bill

* 10
e.2
North Carolina State Library
Raleigh N. C
Doe.
THE
ESC QUARTERLY
VOLUME 22, NO. 3-4 TOBACCO INDUSTRY
TOBACCO
RESEARCH UBO^TOK*
STflH TOBAGO
«J> »«• Si «&' »*d^ tM1
||j, B*s» ?i5H
'iSCO ». •>*."*i
Wto********
^OW*""**'
^
"Our staff has now had an opportunity to study the report
to the Advisory Committee on Smoking and Health. We
believe it is an excellent report and agree with all of the
major findings and conclusions. Consequently, I announced
just two days ago that I had endorsed the main findings and
conclusions which will now constitute general policy for the
Public Health Service."
Dr. Luther L. Terry
U. S. Surgeon General
"It would seem that the sensible solution would be found in
research, to determine what in cigarette smoke causes a
correlation between cigarettes and health problems. I believe
all the experts have agreed that the cause of the health
problem is yet to be determined."
Terry Sanford
Governor of North Carolina
"Those of us who work with tobacco share with the millions
who use tobacco products a concern over questions regarding
smoking and health. Indeed, we have a double interest in the
matter. First, as human beings, we are interested in the
health of our fellow man. Second, we have a natural interest
in the future welfare of our industry—and of the industry's
customers."
George V. Allen
The Tobacco Institute, Inc.
"Mr. Chairman, if there is anything wrong with tobacco,
let us find out what it is. If it is a health hazard, let us find
out why and take corrective measures. When the tobacco
industry is being weighed in the balance, we hope that we
within the industry will not be found wanting, and neither
should the Federal Government."
Malcolm B. Sewell
Leaf Tobacco Exporters Association,
Published by
N.C. EMPLOYMENT SECURITY COMMISSION
ASWELL BUILDING RALEIGH, N. C.
/
KENDALL
CHAIRMAN'S
COMMENTS
Henry E. Kendall
Chairman
N. C. Employment
Security Commission
When we decided to feature the
tobacco industry in this issue of the
ESC Quarterly, it was, frankly, due
to the immense public awareness of
the recent report on "Smoking and
Health" from the U. S. Surgeon General and the
obvious impact such information would have on the
worldwide tobacco industry.
The livelihood of hundreds of thousands of people
in the United States depends upon the production and
marketing of tobacco products, and in an industry al-ready
burdened by over-production of its commodity
the consumer's conviction that smoking is injurous to
his health conceivably could cause a recession from
which the industry would be critically pressed to re-cover.
The Surgeon General's report did cause a reduction
in the use of cigarettes, which now appears to be a
temporary reduction, and a rise, perhaps, in the use
of cigarette substitutes. There is a very pronounced
feeling among tobacco men that the report was non-conclusive,
rather a reiteration of things gone before,
that nothing is actually proven, and they point to their
own attempts for many years to investigate through
research the chemical properties of the leaf and its
habitual nicotine.
So in light of Congressional hearings and universal
publicity and what appeared to be an obvious obstruc-tion
to North Carolina's economy, we asked a repre-sentative
of the tobacco industry to recommend some-one
who would give us an impartial opinion.
"There is no one," he said.
Despite the alarm and general feeling of retaliation
among our tobacco industrialists, there exists a threat
to the tobacco industry even more formidable than the
report of the Advisory Committee on Smoking and
Health. This is a common dilemma to agriculture, one
which has plagued the efficient farmer for many years.
He produces so much and of such quality that produc-tion
exceeds demands, and with raw and processed to-bacco
stockpiling and going into government loan, he
foresees continuing controls and declining allotments.
In 1944 the ESC Quarterly featured cigarette manu-facture.
In 1951 tobacco manufacturing was the Quar-terly
topic. In 1960 the tobacco industry was featured,
so the current magazine is the fourth edition to pre-sent
some aspect of tobacco production and manufac-turing
in North Carolina and is by far the most con-clusive.
Articles containing national, state and local
authority bylines were prepared specifically for the
Quarterly and probably in no past edition has coopera-tion
from contributors been so outstanding.
In 1963 tobacco users spent $8.08 billion for tobacco
products. Tobacco is the fifth largest crop in the
United States and represented $1.3 billion in producer
income. Tobacco manufacturers directly employed
96,000 men and women and in 1963 wages paid to the
insured work force in North Carolina alone amounted
to $156.5 million. Federal, state and local excise taxes
on tobacco products in 1963 yielded $3.3 billion, more
See COMMENTS, page 94
2 ESC QUARTERLY
THE
ESC QUARTERLY
THE TOBACCO INDUSTRY IN NORTH CAROLINA
Volume 22, No. 3,4 Summer, Fa 1
1 1964
Issued at Raleigh, N. C, by the
EMPLOYMENT SECURITY COMMISSION
OF NORTH CAROLINA
Commissioners
Billy Earl Andrews, Durham; Thomas B. O'Conner
Forest City; Horace E. Stacy, Jr., Lumberton; Charles,
L. Hunley, Monroe; Charles T. Kivett, Greensboro;
|
James W. Seabrook, Fayetteville; Henry E. Kendall,
Raleigh.
State Advisory Council
Public representatives: James A. Bridger, Bladenboro,
Chairman: Sherwood Roberson, Robersonville; W. B.
Horton, Yanceyville; Mrs. D. C. Lewellyn, Dobson; Em-ployer
representatives: A. I. Tait, Lincolnton and G.
Maurice Hill, Drexel; Employee representatives: Melvin
Ward, Spencer, AFL, and H. D. Lisk, Charlotte, CIO.
HENRY E. KENDALL Chairman
R. FULLER MARTIN Director
Unemployment Insurance Division
JOSEPH W. BEACH Directoi
State Employment Service Division
H. E. (Ted) DAVIS Editor
Public Information Officer
Sent free upon request to responsible individuals,
agencies, organizations and libraries
Address: E.S.C. Information Service,
P. O. Box 589, Raleigh, N. C.
INDEX ON PAGE 94
COVER LEGEND
Men most concerned and most knowledgeable about to-bacco
spoke this year before the House of Representatives
Subcommittee on Tobacco of the Committee on Agriculture
in Washington. With North Carolina's Harold D. Cooley as
chairman, the Committee met to hear statements concern
ing the U. S. Surgeon General's report on smoking anc
health. Over 50 statements, such as those which are re j
produced in part on the cover, were rendered to the Com
mittee from men vitally concerned with tobacco production,
marketing and research. Parts of other statements an
printed on the opposite page.
OBACCO MEN SPEAK BEFORE HOUSE SUBCOMMITTEE
"To accept the findings of the Surgeon General's report and
say that tobacco is bad and that we should outlaw the
production of tobacco would be as foolish as Baying that
"We find that a large number of deaths are caused by
automobiles and that automobiles are bad and we should
stop production.'
Charles Russell
N. (". Farm Bureau
"The Department's production research is aimed at aiding
farmers to produce tobaccos of a quality which meets
the requirements of domestic and foreign buyers and con-sumers
and that will produce profitable yields. To attain
these objectives, research is carried out on the many com-plex
cultural, diseases, and handling problems that have a
direct influence on the quality and use volume of tobacco."
Dr. Nyle C. Brady
U. S. Department of Agriculture
"As a representative of the basic sciences, I spend my time,
full time, in the laboratory and am interested in a very
basic approach to this problem. And I would like to say
that I hope that this type of support can be extended. I
would strongly recommend that we have an assay system
by which you would tell the possible harmful substances.
And since we do not know the source, it seems foolish to
condemn all of the tobacco until we know what it is in the
tobacco leaf that has to be removed."
Dr. David Young Cooper
University of Pennsylvania Hospital
"If something in tobacco or tobacco smoke is a cause or con-tributing
factor, we need to find out what that something is,
so that it can be removed from tobacco products—and possibly
from other consumer products as well. From such intensive
research could very well come a definitive scientific break-through
as to the cause of cancer in smokers and non-smokers
alike—a breakthrough that might be delayed in-definitely
if tobacco is made the scapegoat and generally
accepted as such."
The late L. Y. Ballentine
Former N. C. Agriculture Commissioner
"If you take our corporate income and franchise taxes—if
you take sales taxes and income taxes paid by the tobacco
workers only, and likewise take the sales taxes on the to-bacco
paid by the consumers in North Carolina alone—we
are talking in terms of about $22.5 million annually going
into the general fund of our State."
Archie Davie
Wachovia Bank and Trust Company
"Still, on the basis of the report to the Surgeon General,
there has been a number of rash proposals to ban smoking
or to stamp a skull and crossbones on every package of
cigarettes. This is utterly absurd on the basis of information
published so far. To be sure many people who smoked have
died of cancer. Some who did not smoke also have died of
cancer."
Horace R. Kornegay
N. C. Representative to Congress
"Now comes the Surgeon General's report which proves for
our satisfaction, and we daresay to the satisfaction of
reasonable men, that smoking is a health hazard. In other
words, from now on the unassailable fact is, the tobacco
industry notwithstanding, that smoking is not safe."
David Cohen
Americans for Democratic Action
"Now, Mr. Chairman and gentlemen, insofar as I can
ascertain there is nothing new—nothing new is claimed in
the contents of this report. It is a very intelligent compila-tion
of statistics which have been prevalent for a long
number of years. And I might add, Mr. Chairman, that we
have not agreed with the interpretation of many of those
statistics."
Fred Royster
Bright Belt Warehouse Association
"We have no intention, or willingness, to disregard the
health factors ; neither are we inclined to permit serious
damage to individual producers, nor to an industry of
economic importance, unless or until reasonably accurate
and complete facts are determined."
Herschel D. Newsom
The National Grange
"The right to smoke or not to smoke is still an individual
right and an individual freedom. Any attempt to legislate
or administrate against this freedom would usher in a
dictatorial type of thinking which I believe would be more
sweeping and more dangerous than any hazards from smok-ing
tobacco."
John C. Williamson
Flue-Cured Tobacco Growers Association
ESC QUARTERLY
Governor Appears Before Federal Trade
Commission To Dissuade Proposal To
Label Cigarettes As Health Hazard
From a Statement Given on January 29, 1964
The proposed rule-making which
now is under consideration directly
affects the economic welfare of the
State of North Carolina.
In larger perspective, it could have
serious implications for the interests
of 21,000,(K)0 Americans who have a
role in the total tobacco industry, and
the concerns of the whole tobacco
region which embraces 21 states. I
would hope the position of all these
people would not be put in jeopardy
on the basis of circumstantial evi-dence
and assumptions.
I appear, therefore, in opposition
to the rules now under consideration.
As the Governor of North Carolina,
I speak primarily on behalf of our
State and its almost five million citi-zens,
all of whom have a direct or an
indirect stake in the tobacco industry.
Much of what I have to say reflects,
at the same time, the interests of all
tobacco regions and people.
First, let me anticipate that I shall
be challenged for suggesting that the
controversy over tobacco and health
is based on circumstantial evidence
and statistical associations. In saying
this, I do not minimize the health
hazard. The fact remains the report
to the Surgeon General on smoking
and health makes it absolutely obvious
that we are dealing with unknowns.
Nobody ever knows the cause of can-cer.
Surgeon General Luther Terry
and every other recognized spokesman
in the health and smoking contro-versy
agree on the one point that
further research is required before
the answer is obtained as to the safe-ty
or hazard of smoking. Not nearly
enough is known.
It can be concluded from the spe-cial
report to the Surgeon General
that the "weight of evidence" indi-cates
an association between exces-sive
cigarette smoking, lung cancer
and certain diseases of the respira-tory
tract. When this is considered in
the worst possible light, the evidence
remains indicative only, and actually
it consists of assumption, and cer-tainly
it doesn't prove that moderate
smoking causes any harm.
In the light of existing knowledge,
I say with all respect to the members
of this Commission, that I hope you
will not assume the burden of proof
for labeling cigarettes as "a health
hazard."
All that is asked by people to whom
tobacco is a livelihood is that our
product not be libeled and our liveli-hood
not be put in jeopardy when
no one yet has the facts, and the
search for scientific proofs is yet
under way.
Let there be no misunderstanding
about the concern for the public
health among the people who grow,
manufacture, and sell tobacco. The
people of North Carolina, and those
who live in other tobacco states, are
more anxious than anyone else to see
cigarettes and other tobacco products
made safe, so that without contro-versy
or insinuation they can con-tinue
to provide enjoyment, content-ment
and relaxation to those who
choose to use them. We sincerely
doubt that smoking in moderation
causes any harm.
We, in North Carolina, subscribe
fully to the campaign for greater and
more purposeful research efforts. All
suggested programs to enlarge the
scientific contributions of the Federal
Government have our full support. At
the same time, we have no inclina-tion
to pass the buck and let the
Federal Government assume the re-sponsibility,
although we put $2 bil-lion
a year into the Federal Treasury.
Our North Carolina tobacco manu-facturers
are contributing the largest
share in two privately sponsored re-search
programs. I refer to the scien-tific
studies sponsored by the Tobacco
Industry Research Committee, into
which $7,250,000 now has been con-tributed,
and to the recently estab-lished
research effort of the American
Medical Association, to which tobacco
manufacturers have committed $10
million over the next five years. If
greater sums can usefully hasten the
arrival at scientific answers to these
health problems, I confidently believe
the tobacco industry can be counted
upon to enlarge its participation.
Meanwhile, there exists a very
great need to synchronize and to bet-ter
organize the many research fa-cilities
which now are at work on
this problem or which can be brought
into play.
To this end in North Carolina we
are seeking to set an example and to
marshal all the research tools and
talents which exist in our State. We
want to bring to bear every resource
we have, in such a way that there
is the least duplication and the great-est
promise of hastening provable
discoveries.
The truth of the matter is that we
have never begun a massive research
attack on the cause and cure of can-cer.
This is long overdue. The problem
is not cigarette smoking alone: it is
the cause and cure of cancer.
I have appointed a three-member
coordinating committee of eminent
scientific administrators. They are Dr.
George Herbert, president of the Re-search
Triangle Institute; Peter
Chenery, director of the State Board
of Science and Technology; and Dr.
William H. Lassiter, chairman of the
North Carolina Cancer Study Com-mission.
It will be the duty of this
committee to draw into cancer re-search
every institution and every
individual from which some scientific
contribution can be anticipated, and
to work directly as an arm of the
Governor's Office.
This emphasis on the economic
scope and importance of tobacco is
not intended in any sense to equate
its commercial aspect with the values
of the public health. But, whenever
consideration is being given to the
problem of tobacco and health, and
the question arises as to what prop-erly
should be done about it, we
cannot escape the awesome respon-sibility
for dealing with a many-sided
problem.
We do not label automobiles dan-gerous
although they are one of the
greatest killers in America. We do
not even restrict advertisements
which glamorize speed and horse-power.
We do not put the skull and
crossbones on the steering wheel al-though
this is the most death dealing
instrument ever invented.
We do not insist that whisky be
labeled with advice that one out of
fifteen who take a first drink will be-come
an alcoholic. We do not force
advertisements to warn that 85 per
cent of all people in prison are there
because of some relationship with
whisky.
Moderation in the use of cigarettes
is likely harmless. No scientist is!
likely to deny this. But reckless con-
See STATEMENT, page 94
ESC QUARTERLY
I
NORTH CAROLINA
DOMINATES WORLDWIDE
TOBACCO INDUSTRY
By Edwin Stanhope Dunn
and J. Anthony Houser
Bureau of Employment Security Research
Not only is North Carolina the
number one tobacco state, but the
extent of its dominance in the indus-try
is revealed by the fact that it
continues to manufacture more to-bacco
products than all of the other
49 states combined, based on Federal
tobacco tax receipts. For the fiscal
year ended June 30, 1963, North
Carolina tobacco employers paid the
United States Government $1,268,316,
000, or 61 percent, of the $2,079,237,-
000 1 total tobacco tax paid by all
tobacco firms in the United States.
The accompanying tables depict
Federal tax sales on tobacco and the
value added by manufacture for 1962
in both the United States and North
Carolina.' As shown in other charts
and tables in this article, North Caro-lina
tobacco contribution is indeed
significant.
Gross Wages
In 1963, gross wages paid by the
insured segment of the North Caro-lina
tobacco industry totalled $156.5
million. With more than 34,000 work-ers
employed in this group, an aver-age
weekly earnings of $88.38 was
realized per worker, or $12.69 above
the average worker earnings in all of
the State's manufacturing industries
in 1963. The employment size of
North Carolina's tobacco industry
places it near the top among the
other industries in the State also, as
only four other manufacturing groups
had more employment in 1963 ; name-
As tobacco products sold in foreign coun-tries
are not subject to the Federal tax,
only the manufactured tobacco products which
are sold in the United States are included.
Latest available data.
ly, textiles, furniture, apparel and
food products.
During 1963 the average payroll
contribution rate for cigarette manu-facturers
liable under the Employ-ment
Security Law in North Carolina
was only 1.21 percent as compared
with 3.15 percent for the balance of
the industry which is made up mostly
of tobacco processors.
Four cigarette manufacturing com-panies
of worldwide importance are
found within the borders of North
Carolina. They are R. J. Reynolds
Tobacco Company in Winston-Salem;
American Tobacco Company in Dur-ham
and Reidsville; Liggett and
Myers Tobacco Company in Durham;
and P. Lorillard Company, Inc. in
Greensboro. These four firms manu-facture
more than three out of every
five cigarettes made or imported in
this country. Two establishments in
Winston-Salem, Brown & Williamson
and Taylors Brothers, Inc., manufac-ture
chewing tobacco and snuff.
Since cigarettes comprise by far
the largest volume of tobacco prod-ucts,
the types of cigarettes manu-factured
may be of interest. Filter
tips comprised 299 billion or 58 per-cent
of the national consumption of
domestic cigarettes in 1963 ; king
size amounted to 99 billion or 19 per-cent;
and regular sized cigarettes
totalled 116 billion or 23 percent.
Leads in Tobacco Processing
North Carolina also is the leading
state in tobacco processing with as
many as 25 to 30 thousand workers
engaged in tobacco stemming and
redrying operations during the heights
ESC QUARTERLY
DUNN and HOUSER
of the season in September. In addi-tion
to the cigarette manufacturers,
there are over 50 independent tobacco
processing plants scattered over the
State. Also, during the season, the
cigarette manufacturers set up tem-porary
buying and prizing operations
in the principal tobacco markets over
the State, which supplement and com-plement
the regular processing work
force. The seasonality of employment
in the industry may be seen in Chart
I, which shows insured employment
for the period 1950-1963. September,
1960, was the first time that tobacco
employment in North Carolina passed
the 50,000 mark. Although the next
two years (1961 and 1962) saw to-bacco
employment rise above the 50,-
000 figure in September, 1963 's peak
amounted to only about 48,000 work-ers.
The ten percent allotment cut in
1963 contributed to this decline as did
continued automation in the produc-tion
facilities. The dominance of the
North Carolina tobacco crop in the
agricultural income picture of the
State is evidenced in Table III.
As the leader in tobacco processing,
one would expect North Carolina to
be the top ranking state in the grow-ing
of flue-cured tobacco. Based on
flue-cured tobacco sales in North
Carolina in 1963, the State likewise
accounts for over three-fifths—as was
the case with cigarettes—of all flue-cured
tobacco. (See Table III.) For the
1963 crop, although the average price
per hundred pounds in North Caro-lina
brought $2.18 less than the South
Carolina average, the State's average
of $58.05 was 35 cents more than the
over-all flue-cured average.
Quantity or Quality
In the past few years much has
been said about the deteriorating
quality of tobacco under the stabiliza-tion
program, and the increasing com-petition
experienced from foreign
countries, especially Rhodesia, Cana-da
and India. The chief criticism of
our tobacco has been that the farm-ers'
emphasis has been on quantity
and not quality; and, as a result, the
tobacco manufacturers have sought
good quality smoking tobacco where-ever
it could be found.
By reason of wide publicity on
quality, plus government action and
excellent growing weather during the
1964 crop, it appears from early
flue-cured sales in the 1964-65 season,
that an excellent quality smoking
crop in 1964 is in the making. Per-haps
these are just the forces needed
to give impetus to the movement back
to quality in order to blunt, if not re-capture,
part of the ground lost to
foreign competition and to correct
overproduction.
A comparison of over-all tobacco
employment in the United States and
North Carolina since 1950 is shown
in Chart II. As can be seen, this State
has been increasing its lead and domi-nance
over the years. Whereas, North
Carolina accounted for "only" 24.5
percent of all national insured tobacco
TABLE I
FEDERAL TAX STAMP SALES FOR TOBACCO
IN UNITED STATES AND NORTH CAROLINA
YEAR OF 1962
Industry Value of FederEd Tax Stamps Sales Percent
Group United States North Carolina of U. S.
Tobacco—Total $2,079,237,000 $1,268,316,000 61.0
Cigarettes 2,010,524,000 1,263,144,000 62.8
Cigars 50,232,000 b —
Tobacco (Chewing
& Smoking) & Snuff 16,381,000 4,620,000 28.2
Other" 2,100,000 552,000 26.3
' Includes taxes on cigarette paper and tubes, court fines, penalties and taxes on leaf tobacco sold
or removed in violation of Section 5731, Internal Revenue Code.
b Negligible.
Source: Annual Report of Commission of Internal Revenue for Period Ending June 30, 1963,
TABLE II
VALUE ADDED BY MANUFACTURE IN TOBACCO
FOR UNITED STATES AND NORTH CAROLINA
Industry Group
Cigarettes
Tobacco Stemming
& Redrying
United States
$1,248,402,000
North Carolina Percent of U. S
118,600,000
Source: Annual Survey of Manufactures—1962.
$762,849,000
59,501,000
61.1
50.2
TABLE III
GROSS SALES OF FLUE-CURED TOBACCO
BY STATES—1963
Average Price
State Pounds Per cent of Total
63.7
Per Hundred Pounds
North Carolina 932,797,616 $58.05
Georgia 173,195,347 11.8 56.98
Virginia 168,393,666 11.5 54.20
South Carolina 163,606,690 11.2 60.23
Florida 25,353,880 1.7 56.74
Total 1,463,347,199 100.0 57.70
Source: North Carolina Tobacco Report, 1963-1964.
DISTRIBUTION OF INSURED EMPLOYMENT AND WAGE PAYMENTS
IN THE NORTH CAROLINA TOBACCO INDUSTRY
BY MAJOR PRODUCTS—1963
No. of
Tobacco Reporting Avg. Monthly
Products Units Employment Total Wages
Averagi
Contribuifl'
Contributions Rate ('
134
6
'lotal
Cigarette
Manufacturing
Tobacco (chewing
& smoking) & snuff
Tobacco Stemming
& Redrying 128
34,054 $156,494,106 $1,743,652 1.74
23,798 $121,512,072 $ 874,367 1.21
10,256 $ 34,982,034 $ 869,285 3.15
ESC QUARTERLY
employment in 1950, its commanding-lead
had grown to about 36 percent
by 1962. And this was accomplished
by significantly divergent trends: na-tional
employment declined during
the period, while North Carolina's
tobacco employment rose despite the
jver present downward influence of
automation.
Report Wallops Sales
A relatively new problem confront-ing
both North Carolina and the
United States concerns the Surgeon
Seneral's report on smoking and
lealth, released in January, 1964.
Immediately following this report,
wholesale and retail outlets for cigar-
?ttes in the country experienced a
iecline of 10 to 15 percent in sales,
^.fter the sharp decline in sales, a
-ecovery set in during subsequent
nonths.
From a nationwide viewpoint, aside
"rom North Carolina, the impact of
;obacco on the over-all economy can-lot
be exaggerated. In the United
states, tobacco is an $8 billion indus-
,ry. In 1962, 750,000 American farm
'amilies in 21 states received over
51.3 billion from tobacco crop sales.
Tobacco is the fifth largest cash
•rop in the nation, and in 1962, ranked
hird in value of all agricultural ex-
)orts. Cash farm income from to-lacco
exceeded the total for all truck
•rops grown in the United States.
Although the 1962 cash farm receipts
vas grown on only four-tenths of one
>ereent of the nation's cropland.
Indicative of the relatively high-ost
and high-labor requirements of
he tobacco crop is the $155 million
n wages paid by farmers to hired
abor in the production and curing of
obacco in 1962, and more than half
t billion dollars for other expenses in
iroduction and marketing.
Other industries which are closely
ied in with and affected significantly
>y the national tobacco crop are as
ollows: fertilizer and lime, $45 mil-ion
annually; pesticides, $20 million;
uel oil for tobacco curing, $70 mil-i^_
i
i' '-•>
Z^
CHART NO. 1: INSURED EMPLOYMENT
IN N. C. AND U. S. FOR SELECTIVE
YEARS 1950-62: North Carolina has
increased its lead in insured employ-ment
compared to overall tobacco em-ployment
across the nation. Tobacco
jobs increased in our State despite the
ever present influence of automation.
lion; textiles, $8 million for tobacco
plant bed cloth and $2.5 million for
tobacco twine, for a total of $10.5
million; and miscellaneous, $55 mil-lion—
including $40 million in auction
warehouse receipts. In addition to the
side industries serving the farmers,
a number of supplying industries;
e.g., cigarette paper manufacturers
are dependent upon the tobacco prod-ucts
manufacturers for their revenue.
Banks and other financial institu-tions,
as well as forest industries
that produce tobacco sticks and bas-kets,
are greatly affected by tobacco's
behavior, not to mention the economic-impact
on retail establishments.
Manufacturing 55 Percent Of Payroll
In 1962 the nation's tobacco manu-facturers
gave employment to about
97,000 workers, with wages totalling
$400 million. Even though cigarette
manufacturing employed only 44 per-cent
of all tobacco manufacturing, it
accounted for more than 55 percent
of the industry's payroll.
CHART NO. II: INSURED EMPLOYMENT IN TOBACCO MANUFACTURING IN NORTH
CAROLINA, 1950-62: The seasonality of tobacco employment can be graphically demon-strated.
In 1960 tobacco employment for the first time in North Carolina passed 50,000
workers. In 1963 the peak of employment amounted to only about 48,000 workers.
The transportation segment of the
economy also merits consideration.
Hauling tobacco within the borders of
the continental United States is a $79
million a year business. Cigarette
paper is a $25 million a year industry
in which Ecusta Paper Corporation,
near Brevard, North Carolina, pro-duces
about 95 percent of cigarette
papers made in the United States.
The manufacture of cellophane, of
which the tobacco industry used 40
million pounds in 1961, is another
important item made at Ecusta. In-cidentally,
bakery and meat products
are the only industry groups using
more cellophane than tobacco. Ap-proximately
71 million pounds of
aluminum foil are used annually for
wrapping cigarettes. Also, in four
states where no tobacco is grown,
farmers derive an annual income of
nearly $3 million from the production
of flax fiber used in manufacturing
cigarette paper.
Excise taxes collected from tobacco
products by federal, state and local
governments amounted to $3.2 billion
for fiscal year 1961-62. Federal ex-cise
taxes on cigarettes alone ($2
billion) were more than 15 percent
of the total federal excise taxes col-lected
in that year. In addition to the
federal excise tax levy, every state
except three—North Carolina, Colo-rado
and Oregon—levy additional
state taxes on tobacco." For that mat-ter,
six states have the same levy on
cigarettes as the federal government;
namely, eight cents per package, or
a combined tax of 16 cents per pack.
With a package of cigarettes selling
for 27 to 30 cents, the impact of such
taxes is obvious.
Federal income taxes paid by to-bacco
manufacturers totaled $330
million ; and they paid approximately
$7.5 million in ad valorem taxes in
North Carolina alone in 1961.
In summary, an estimated 17 mil-lion
people in the United States de-pend
on tobacco for all or part of
their livelihood, so it certainly can be
said that the "Golden Weed is a
broad golden stream." Small won-der,
therefore, that so many people,
and especially North Carolinians,
should shudder each time there is a
lung cancer pronouncement associated
with tobacco; and can only hope that
advancing research may overcome
any tobacco deficiencies. The federal
government might well take an even
more active role in this connection as
it too is involved to the tune of many
millions of tax dollars.
* Combined Federal and States taxes per car-ton
of cigarettes in 1963: $0.80 per carton
—
3 states; $1.00—1 state and D. C; $1.05—1:
$1.10—3: $1.15—1; $1.20—8: $1.30—9; $1.40—
11; $1.50—7; and $1.60 per carton—6 states.
Source: Tobacco Tax Council, North Carolina
Tobacco Report—1962-63, April, 1963.
ESC QUARTERLY
GEORGE V. ALLEN is a native of
Durham and a 1924 graduate of Trin-ity
College (now Duke University).
As an undergraduate he decided to
enter the foreign service and financed
his post-graduate work in inter-national
law at Harvard by working
as a school teacher and newspaper
reporter. Allen took his masters degree
in 1929 and took the foreign service
examination the following year. In
subsequent years he had the distinc-tion
of representing the United States
as ambassador to four countries,
Iran, Yugoslavia, India and Greece,
and served as Assistant Secretary of
State on two occasions. At the age of
42 he was our youngest ambassador
abroad when President Truman ap-pointed
him as ambassador to Iran.
Allen has participated in a number of
international conferences, including
the Foreign Ministers' Conference in
Moscow in 1943, the Roosevelt-
Churchill Conference in Cairo in 1943,
the United Nations Conference in San
Francisco and the Potsdam Confer-ence
in 1943. Awarded honorary de-grees
from six American colleges,
Allen achieved the highest rank ob-tainable
by an American diplomat
and is one of 14 Americans who have
been accorded the permanent classifi-cation
of Career Ambassador. His
latest assignment was Director of the
U. S. Information Agency, and he
returned to the tobacco industry in
1960. A trustee of Duke University,
Allen owns a tobacco farm near Dur-ham,
N. C. He is married to the for-mer
Katharine Martin of Washington,
D. C.
It's Unlikely, But Formers Need Voluntary
Progrom . . . Not Government Intervention
By George V. Allen
President, The Tobacco Institute, Inc.
V.exations of the times notwith-standing,
tobacco is here to stay.
Any commodity which has survived
more than 350 years of sustained as-sault
has amply proved its durability.
Tobacco's survival is assured by
more than 70 million Americans—and
many more millions in lands around
the world—who find its use pleasur-able
and relaxing. It also is assured
by the superior quality of U.S. to-bacco,
which most of the world shows
a sustained willingness to buy even
when it is sold at premium prices.
The industry is now in a difficult
period.
We recognize the seriousness of
purpose of those who are concerned
about tobacco and health, but we are
confident that science will provide
the answers to questions that now
exist.
The most immediate development
in the current situation came in
August when the Federal Trade Com-mission
deferred for six months the
effective date of its arbitrary rule to
require health warnings on cigarette
packages. The new deadline is now
July 1, 1965, which is also the dead-line
for a required health warning in
all cigarette advertising.
The delay will give Congress time
to consider various legislative pro-posals.
It is the conviction of many
business groups, legislators and
newspapers, as well as the tobacco
industry, that the FTC overstepped
its authority in seeking to legislate
such rules regulating labeling and
the content of advertising. Such
powers belong to the Congress alone,
rather than to an independent agency
set up to administer laws, not to
make them.
These questions, however, now can
be clarified by the next Congress and
we are confident its members will
consider all the pertinent factors be-fore
taking action.
Meanwhile, the House Committee
on Foreign and Inter-state Commerce,
considering the matter, has heard
testimony from a number of promi-nent
medical scientists who expressed
doubts concerning the health charges
against tobacco.
The Arithmetic
Happenings such as these are
clearly of the greatest import to the
long-range economy of North Caro-lina
and especially to the functioning
of its Employment Security Commis-sion.
As America's principal grower
of tobacco and manufacturer of its
products, North Carolina will be
heavily affected by the course of to-bacco's
fortunes. Whatever happens
to tobacco will happen in enlarged
form on North Carolina farms, in its
warehouses, its factories, its trans-portation
industry and in its retail
economy.
In several states tobacco provides
a sizeable share of all farm cash in-come—
and for North Carolina this
share is around 50 percent. The
rapid fanning-out of that money to
all other sectors of the State economy
is obvious. There are abundant statis-tics
on the billions in spending which
tobacco generates—for farm and fac-tory
wages, transport, paper, foils,
fertilizers and so on. In addition,
direct tobacco taxes bring about $3.3
billion into federal, state and local
treasuries, and when the consumer
pays out his tobacco dollar, who is to
compute how many times—and how
much—that dollar is thereafter taxed
in the endless process of changing
hands?
Jobs and taxes are critical to peo-
8 ESC QUARTERLY
pie and to governmental budgets that
keep trending upward. But we must
also give serious consideration to the
health problems which cannot be, and
are not, easily ignored.
Research—and More
In that light, the most useful and
hopeful action all segments of the
tobacco industry can take, with re-spect
to both their public responsi-bility
and self-interest, is to intensify
organized scientific research. Part of
this is being done through the Coun-cil
for Tobacco Research—U.S.A., and
through the five-year, $10 million
grant which the six major cigarette
manufacturing companies have made
to the American Medical Association
Education and Research Foundation.
Also encouraging was the Senate-
House approval in August of a $675,-
000 additional allocation to the Ox-ford
(N.C.) Experiment Station for
basic research in tobacco. This is
more than twice the research money
formerly available there, and much
of it is intended to be devoted to stu-dies
that should bring better under-standing
of the health questions.
The industry's most immediate
need is therefore clear: Expanded
scientific research in all aspects,
chiefly in the areas of agriculture
and health. Tobacco's future depends
upon it — objective, unrestricted,
imaginative research, carried on by
the industry and by the scientific
community in general.
Tobacco—The Stable Staple
For 352 years tobacco has been
among the steadiest sectors of the
American economy. Investment in it
through share owning has come to
be regarded, for practical purposes,
as depression proof, or nearly so.
Styles in tobacco's use have
changed rather slowly with time
—
from snuff to plug to smoking cigar-ettes
and cigars—each shift in custom
bringing greater consumption, al-though
none so phenomenal as the
surge of the cigarette since 1914.
The last generation's changes have
been largely technological and have
mainly affected cigarettes, which
have gone to longer length, to men-tholation
and then to nitration.
Manufacturing technology has been
able to take these in stride, and there
is presently no visible consumer de-mand
pointing to the likelihood of
radical changes in growing or manu-facturing
processes. Therefore, all
bther market factors remaining equal,
there should be no question of con-tinued
industry stability.
The Export Outlook
The long-range promise for tobacco
(exports is even more hopeful. Exports
will increase as trade barriers are
Iropped, because American tobacco
ind American tobacco products are
still the best in the world. This is
shown by the fact that even though
our prices for leaf and the price at
which American cigarettes are sold
abroad are far higher than any com-petition,
leaf exports have held their
own and product exports have in-creased.
If given an equal chance,
American leaf and products would
very steadily increase. If there were
a common market among the U.S.,
Canada, and Europe, for example, our
industry would find a greatly in-creased
demand.
Price Support
While the Tobacco Institute does
not take a policy position on govern-mental
support of tobacco leaf prices,
I have never heard a manufacturer
complain about the program. On the
contrary, I have heard many speak
in its favor. Manufacturers are aware
that the prosperity of the industry
is indivisible and that they can-not
prosper if farming languishes.
Neither flue-cured nor burley can
flourish if the other is depressed. The
destiny of the entire industry, from
grower to retail dealer, is a common
destiny.
The tobacco farmer works hard for
his crop and should receive a good
return for his labor. This may not be
feasible without some workable form
of production control. Two major
problems must be avoided, it seems
to me. If we are to continue to export,
the price of U.S. leaf and its products
must not get too far out of line with
the world market, and the search for
a heavier yield per acre must not be
allowed to reduce the high quality of
our leaf.
As the owner of a small tobacco
acreage in North Carolina, I per-sonally
have been inclined to favor
some combination of acreage and
poundage as a basis for allotments.
I believe the trend is in that direction.
I believe also that a sudden removal
of all controls, favored by some
groups, would bring chaos. Maryland
farmers voted controls out a few
years ago, but after a brief experi-ence,
were eager to vote them in
again.
I am not certain that subsidies to
tobacco farmers are necessarily a
long-term likelihood. We may see
them end if production and consump-tion
can be brought into somewhat
better balance. The tobacco industry,
from end to end, would rather stand
on its own without reliance upon tax
money. For some time after the to-bacco
program began that appeared
to be possible. We were proud that
the program was costing the taxpay-ers
nothing. But a hope of keeping it
that way was dashed by a natural re-sult
of controls based on acreage
alone, for new types of tobacco were
planted to increase quantity at the
expense of quality. Stocks in stabili-zation
began to increase faster than
sales.
If poundage control can correct
this unhappy situation, we may again
be able to take renewed pride in a
program which does not cost the tax-payers
money.
I would be happy if farmers could
agree on a voluntary program that
would stabilize production, with no
governmental intervention. But that
happy day seems rather unlikely.
In the meantime, we need not
shrink from price supports. They are
solidly grounded in a democratic sys-tem.
Government is but a mechanism
designed by people to serve their
common welfare. A majority of those
people could abolish not only controls,
but the government itself. Government
becomes the enemy only when those
who lead it overstep Constitutional
bounds. But it is first a creation of
and for people, and where it is useful
and convenient, as in the support
program, we in tobacco cannot justi-fiably
oppose our own interest by re-fusing
to use its mechanism.
The most practical and pragmatic
view, it seems to me, is that the
tobacco program, however imperfect,
is preferable to chaos, and that with
some changes it can be made a much
more useful tool, especially for farm
ers.
And What About North Carolina?
None of the problems I have sug
gested appears, by itself, to pose a
major threat. North Carolina's leaf-producing
primacy seems to be in no
danger. The state still holds the prin-cipal
qualifications to maintain its
lead—climate, soil, factories, agricul-tural
and manufacturing know-how.
It also has that intangible but vital
asset—the tradition.
But if science or technology or
simply changing taste should at some
future time indicate a rather different
type of tobacco—blander perhaps, al-though
that is pure speculation
—
North Carolina has the soil, climate,
research and know-how to produce it.
North Carolina can best assure its
leadership by emphasizing research —in its agricultural experiment sta-tions,
its great universities, its hospi-tals,
the laboratories in its factories
and in the Research Triangle.
If the state is complacent, its top
position will be taken by some other
state.
After all, tobacco can be grown
almost anywhere in the U.S. During
the past 10 years, Canada has become
self-sufficient in growing the leaf, and
Canada may become a competitor of
ours in the export market. Canada
and Rhodesia have great experimen-tal
activities underway. The challenge
is urgent.
ESC QUARTERLY
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